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Trade or Business Determinations: Interpreting Varying Guidance for Real Estate, Family Offices, 199A, 163(j)

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Friday, October 20, 2023

Recorded event now available

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This webinar will explore the importance of and difficulties in identifying a trade or business in its multiple contexts throughout the Internal Revenue Code. Our panel of tax professionals will point out similarities and differences in these interpretations and provide best practices for deciding and documenting when a business activity rises to the level of a trade or business in various contexts.

Description

Whether an activity is a trade or business is a critical tax determination in multiple areas. Trade or business is a term that is not defined in the Internal Revenue Code or the regulations. What constitutes a trade or business and the facts and circumstances contributing to the determination varies depending on the applicable tax situation. Most familiar may be Section 162(a), which states, "There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business" but provides no definition of a trade or business.

Most troublesome could be the determination for real property, which relies on Section 469(c)(7)(C), "'real property trade or business' means any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business." Although this section and the related regulations include the term trade or business, a concrete definition is not provided.

In addition to being able to deduct ordinary and necessary expenses, taxpayers wishing to qualify for the 20 percent deduction under 199A, calculate 163(j) limitations, or deduct expenses for a trade or business must all be sure their level of activity rises to that of a trade or business. Practitioners must rely on court cases, legislative history, and facts and circumstances to make these determinations.

Listen as our panel of federal income tax experts compares and contrasts the multiple interpretations of what constitutes a trade or business throughout the IRC.

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Outline

  1. Trade or business determinations: introduction
  2. Real estate
  3. Investment management
  4. 199A
  5. Other applications
  6. Separating and aggregating activities
  7. Relative cases

Benefits

The panel will review these and other critical issues:

  • Recent and relative cases related to trade or business determinations
  • Best practices for deciding and documenting a trade or business determination
  • How real estate activity qualifies as a trade or business
  • Steps taxpayers can take in specific areas to better qualify as a trade or business
  • Differences in trade or business determinations throughout the Internal Revenue Code

Faculty

Borden, Bradley
Professor Bradley T. (Brad) Borden
Professor of Law
Brooklyn Law School

Professor Borden’s research, scholarship, and teaching focus on taxation of real property transactions and...  |  Read More

Mandarino, Joseph
Joseph C. Mandarino
Partner
Smith Gambrell & Russell

Mandarino is a Partner in the Tax Practice of Smith, Gambrell & Russell, LLP.  His practice focuses on...  |  Read More

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