PHILIP YAMALIS: Welcome to our IRS presentation today. Tax Reform Basics for Small
Businesses and Pass-Through Entities. We're glad you're joining us. My name is Phillip Yamalis.
I'm a Stakeholder Liaison at the Internal Revenue Service and it's my pleasure to be your
moderator for today's webinar. Today's webinar will last approximately 60 minutes. Before we
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your questions, so, really, don't by shy. Send us your questions. Remember, click the Submit
button so that we can see your questions. Now, during today's broadcast, we'll take a
few breaks to share some knowledge-based questions with you. At those times, a polling style
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that you select the response that you believe is correct by clicking the radio button next to
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enter your response timely in the Ask Question feature this way we can track your participation
in today's webinar. Okay. Let me introduce our presenters for today's webinar. Our
first presenter is John Tuzynski. He's a Director of Examination in the headquarters of the
small business self-employed division of the Internal Revenue Service. The other presenter
today is Mr. Richard Furlong of he's a senior Stakeholder Liaison, proud to call him my
colleague in the communication and liaison division. So, guys, there's no time like the present
to get things started. John, let me turn it over to you. JOHN TUZYNSKI: Thank you,
Phillip. And it's my pleasure to be with you here today. During this session, we will
highlight provisions in the Tax Cuts and Jobs Act that was signed into law on December 22nd of
2017 that affects small businesses. There were a significant number of provisions, and we do
not have time today to cover them all, but we have picked some that we believe will be relevant
to you. So we will review the following topics. New rules for depreciation. Modifications of
the treatment of certain farm property. A collection topic, the time limit for contesting
levies. Information on like-kind exchanges. The Qualified Business Income Deduction, better
known as The 199A deduction. And the gift and estate tax exclusion. So with that, let's start
with new rules for depreciation that can be found on the next slide. So we will be
talking about section 179 property placed in service in taxable years beginning after December
31, 2017. The maximum section 179 deduction increased from $500,000 to $1 million. And I
remember when I started with the IRS back in 1985, the 179 deduction was $10,000. So you can
see just how much it is now. I very valuable deduction for small businesses. The election is
made to claim the 179 deduction on form 4562. And just like to add that this deduction cannot
add to or create a loss. Also, the deductions phase out threshold has increased from $2
million to $2.5 million. And some refer to that as the investment limitation. So the maximum
179 deduction is reduced dollar for dollar by the cost of qualified property that exceeds this
limit or $2.5 million. In addition the definition of section 179 property now includes, if the
taxpayer elects, qualified improvement property. And what that means is any improvement that is
to section 1250 property to an interior portion of a building that is non-residential real
property if the improvement is placed in service by the taxpayer after the date that the
building was first placed in service. Improvements do not qualify if they are attributable to
the enlargement of the building, you know, any elevator or escalator or the internal structural
framework of the building. And in addition, the following improvements also are subject
to 179 and that would be non-residential real property, again, placed in service after the
property was first placed in service. So that means you can't just take it on newly acquired
property. But it applies to roofs, HVAC equipment, fire protection systems, alarm systems, and
security systems. The new law also expands the definition of section 179 property to in include
certain depreciable tangible personal property when used when furnishing lodging. And what I
mean by that would be beds, furniture in hotels, and apartment buildings. For qualified
property acquired and placed in service after September 27, 2017, and, so, this is actually a
retroactive provision. The bonus depreciation increased from 50% to 100%. The slide shows you
the change in the percentage after 2022. Also, qualified film, television, or live theatrical
productions are now eligible for bonus depreciation rather than its prior treatment as being
able to be immediately expensed under section 181. So now a taxpayer can use the new bonus
depreciation if a deduction otherwise would have been allowable under section 181. So
on the next slide, I'd like to talk about what I think is really one of the biggest changes to
the bonus depreciation and that is in addition to new property, the new rules allow the
additional first year depreciation now on used property. And a couple of caveats to that. So
you can't have used the property at any time before acquiring it. And you can't acquire the
property from a related party. So I think as you'll see on the next slide, it can be
used property, but new to you. Okay? So what that means is you can't have a acquired property
from a component member of a controlled group of corporations. Your basis can't be determined
based on what that basis would have been on the hands of the seller or the transferor, and your
basis is not figured under the provision for deciding the basis of the property acquired from a
decedent. For property place in service after 12/31/2017, I'm going to talk a little bit about
luxury automobiles. So if you don't take the additional first year bonus depreciation, the
maximum allowable depreciation deduction for the first year is $10,000. $16,000 for the second
year. And then $9,000 for the third year. And then after that, $5,760. But if you elect the
first year bonus depreciation, the allowable depreciation deduction for the first year is
increased by $8,000. It's now $18,000. In addition, as you can see in the second bullet, the
new law shortens the recovery period for machinery and equipment used in a farming business. It
was seven years, and now it's five. And it excludes grain bins, and cotton ginning assets,
fence and other land improvements. In addition, the original use of the property must begin
with the taxpayer after 12/31/2017 and that's as well as the recovery period. And as you can
see on the last bullet, the new law removes computers or peripheral equipment from the
definition of listed property. And that's provision 13202 of the tax cuts and jobs act.
And, so, speaking of certain farm property, a taxpayer is not required to use the 150%
declining balance method for 3, 5, 7, and 10-year farm property placed in service after
12/31/2017. However, if the property is 15 or 20-year property, the taxpayer would still
continue to use the 150% declining balance method. So Philip, I think it's time for us to share
our first polling question with the audience. PHILIP YAMALIS: John, sounds like a
plan. Excellent stuff on the new rules for depreciation. So let's take a look at our first
polling question then. Which statement on the slide is true regarding the new rules for
depreciation? Which statement is true regarding the new rules for depreciation? Here are your
choices. Is the correct response A, bonus depreciation increased from 50% to 100%? B,
the maximum section 179 deduction is increased from $500,000 to $1 million. C,
computers are no longer considered listed property. Section 179, D, Section 179
deduction phase out threshold has increased to $2.5 million. Or is it E, all of the above?
Take a minute. Click on the radio button you believe most closely answers this question.
Which statement is true regarding the new rules for depreciation? A, bonus
depreciation increased from 50% to 100! . B, maximum Section 179 deduction increased
from $500,000 to $1 million. C, computers are no longer considered listed property.
D, Section 179 deduction phase out threshold increased to $2.5 million. Or is
it E, all of the above. Okay. I think I've given you a moment to think about this and answer
this correctly. Let's stop the polling now, folks. And let's share the correct answer on the
next slide. All right. Which statement is true regarding the new rules for depreciation. The
correct response is E. All of the above. All right. Folks, let's see how you did.
I'm waiting for our technical support to flash to me what percentage of you responded correctly.
And okay. It looks like 92% of you answered that correctly. Fantastic! Fantastic! So, that
means everybody is paying attention. So Richard, let me turn it over to you to discuss the time
limits for contesting levies. RICHARD FURLONG: Well thank you, Philip and good
afternoon, everyone. Now as John indicated when he reviewed the topics that he and I will
discuss today, this topic on levies was incorporated into TCJA and it deals with collection
matters. So first, just a bit of a refresher on what is a levy. Now, the taxpayer fails to pay
an assessed tax after notice and demand for payment. Then the IRS may seek collection of the
taxes, and that would include interest and penaltiesIndiscernible] and by levy, against all of
the taxpayer's property and that would include real property, personal property, tangible
property, and even intangible property. Under the new law however, as we'll discuss in this
slide and the subsequent slide, the taxpayer or a third-party custodian of property that the
Service has wrongfully levied has an additional amount of time to administratively contest that
levy. So, this is provision under the internal revenue code we're talking about code section
6343 B] And 6532 C] And those are the two sections that is deal with the time period for filing
an administrative claim of wrongful levy or for the return of property of proceeds from the sale
of property that has been wrongfully levied. And a levy is considered wrongful if the Internal
Revenue Service improperly attaches a levy to a property that belongs to a third-party. Let's
say financial institution or physical custodian owner of the property in which the taxpayer has
no rights. The taxpayer whom we're seeks to collecting the delinquent taxes. So this is a
taxpayer-favorable provision that extends that time. Previous it was only 9 months for filing
these claims. Now it's extended until 2 years from the wrongful levy. And one more
point on this slide, the tangible property, there is no time limit to file a claim if the IRS
has wrongfully levied the property of a house or an automobile. Now, if we go into the next
slide, there's different ways that the service can return the property. The IRS can return the
property that was levied and obtained by the service. It can return any money that was levied
upon, let's say a financial account. Or the service can return any money received from the sale
of the property that was wrongfully levied. Now, keep in mind though that before the IRS
levies any properties, we're obligated under the law, and this law has been in effect for quite a
while, to issue what is referred to as a Final Notice of Intent to Levy your notice to levy and
notice of your rights to a hearing. Before issuing a notice of a levy to third-party in custody
of the taxpayer's property. And it's very important that anyone who receives the final notice
of intent to levy should call the IRS to resolve the liability before a levy is issued. And I
would like to point out that among the resources on the IRS tax reform webpage, we have a
one-page publication. It's number 4528. It's entitled Making an Administrative Wrongful Levy
Claim Under Internal Revenue Code Section 6343B. I recommend that to you if you're ever pursuing
a wrongful levy claim within the allowable two years. And with that, Philip, I think we're
ready for our next polling question. PHILIP YAMALIS: You got it. I'm taking notes
here. You said publication 4528? RICHARD FURLONG: That is correct.
PHILLIP YAMALIS: Thank you so much. All right. Our next polling question is true or false
question. The question is: The time limit for contesting levies is extended from 9 months to
2.5 years. So do you believe this is true or false? Of course you select A for true, and B for
false. Take a minute. Click on the radio button you believe most closely answers the question.
Time limit for contesting levies is extended from 9 months to 2.5 years. Again is the correct
response A, true? Or B, false? Okay. All right. Hopefully you've had time to figure
out whether that's true or false. Let's stop the polling now. And we'll share the correct
answer on the next slide. And the correct answer for the time limit for contesting levies is
extended from 9 months to 2.5 years. The answer is B, false. Time limit was increased to 2
years. Not 2.5 years. So let's see how you did. I see that 73% of you answered that had
correctly. It might have been a little bit of a trick question. What do you think Rich? Want to
give a little more clarification on that? RICHARD FURLONG: Sure, and I think perhaps
because the area of collections is not necessarily an area that the majority of our audience are
involved in. So, the reason that this is a taxpayer-favorable provision of the Tax Cuts and
Jobs Act is that there's additional time for a third-party who had for a property wrongfully
levied by the IRS, because let's say the party had a security interest that was ahead of the
Service, they have now not 9 months, but 2 years to file an administrative claim or to go to
court. So it's not two and a half years but it's two years. And, again, that publication 4528
provides a nice overview of the process to follow when filing these wrongful levy claims, Phil.
PHILIP YAMALIS: Awesome, man. Thanks for that clarification. That's awesome. Yeah,
I have to agree with your statement that not a lot of us are familiar with the collection
procedures. So this could be a very, very beneficial area that we touched on today. So why
don't we continue. I'm going to turn it back to you to discuss like-kind exchanges.
RICHARD FURLONG: Okay. Thank you, Phillip. And this is probably an area which a greater
number of our audiences are familiar. And certainly, if there's a code section that if you're
involved in real estate, code Section 1031 is one your familiar with. Because that provides the
ability under certain circumstances to effectuate the like-kind exchange. And when doing so
properly, any gain or loss is deferred on the exchange of like-kind property. However, the new
law makes a major change to Section 1031 for like-kind exchanges. And beginning on or after
January 1, 2018, for any exchange property that the taxpayer is seeking Section 1031 treatment
either defer the gain or loss, the exchange property must be real property. And it must be real
property held for productive use for a trade or business or for an investment. So that means
that in this context, the real property that is held primarily for sale to customers, i.e.,
inventory would not qualify for like-kind exchange treatment. And that was the case under old
law. Now the big change though is that by now under the new law, allowing only real
property to qualify for like-kind exchanges, exchanges of personal property will no longer
qualify. Now personal property would be defined as vehicles, machinery, equipment, and also
intangible items such as patents or other types of intellectual properties. Those no longer
qualify for like-kind exchange treatment for exchanges on or after January 1, 2018. With one
caveat, there is a one transition rule under the new law. So if there are exchanges of personal
or intangible property, in which the taxpayer disposed of the relinquished property, that's the
property that the taxpayer is giving up and exchanging, or received the replacement property, in
either situation if they relinquish the property or receive the replacement tangible or
intangible personal property on or before December 31, 2017, then it will still qualify for
like-kind exchange treatment. Now on our next slide, let's just look at the basic
requirements and one always wants to keep in mind for like-kind exchanges. Obviously, in order
to be considered like-kind, the real properties must be of the same nature or character so,
generally speaking, real property is generally of a like-kind to other real property irrespective
of how that property is used. The one exception to that is that real property located outside
of the United States is not considered like-kind to real property located within the U.S.. So
you could not have a Section 1031 property for exchanging U.S. real estate, real property, for
real property outside of the United States. Also, under the 1031, exchange of stock in
what I refer to as mutual ditch, reservoir, or irrigation companies, they may still qualify for
like-kind exchange under the new law. And that's no change from prior law. Similarly, the
requirement that the taxpayer must identify the replacement property within 45 days the of
disposition of the relinquished property and that the entire exchange must be completed within
180 days. Those are still requirements in code Section 1031. And, finally, any non-qualifying
property that is part of a like-kind exchange, it's treated as what we refer to as "Boot." And
the taxpayer will need to recognize at least a portion of the otherwise deferred gain if there is
boot involved in that exchange. Typical example would be cash in the exchange. So, as under
the prior law, however, if you do receive boot, it would not trigger the recognition of any loss
in the exchange. So Phil, that's a lot of information. And I think it tees us up for
next polling question. PHILIP YAMALIS: It sure does, Richard. So, let's ask the
audience, are you ready for our third polling question? Well, here it is. Which of the
following statements is true regarding like-kind exchanges under the new tax law? Is the answer
A, properties do not have to be the same nature or character to be considered like-kind? B,
taxpayers do not have to apply Section 1031 for qualifying exchanges of real property? Or is it
C, exchanges of personal property no longer qualify for like-kind exchange treatment? Take a
minute. Click on the radio button that you believe most closely answers the question. Which of
the following statements is true regarding like-kind exchanges under the new law? Possible
responses are A, properties do not have to be the same nature or character to be considered
like-kind. B, taxpayers do not have to apply Section 1031 for qualifying exchanges of real
property. C, exchanges of personal property no longer qualify for like-kind exchange treatment.
Take a look. Okay. Let's stop the polling now. We'll share the correct answer on the next
slide. And the correct answer is C. Exchanges of personal property no longer qualify for
like-kind exchange treatment. All right. So let's see how you did. Excellent! I see
that 90% of you responded correctly. That's an A in my book. So, John, let's turn it back over
to you, because it looks like you're going to share some information about Qualified Business
Income with us? JOHN TUZYNSKI: Yes. Thank you, Philip. So, this provision is
sometimes referred to as the 20% deduction or the 199A deduction. This deduction will affect
many taxpayers. For taxable years beginning after 12/31/2017, individuals and certain trusts
and estates may be entitled to do a deduction of up to 20% of their qualified business income
from a qualified trade or business plus 20% of the aggregate amount of their qualified REIT
dividends and qualified publicly-traded partnership income. Now, Qualified Business Income, or
QBI, means the net amount of qualified income, gain deduction, and loss, for any qualified trade
or business of the taxpayer. So it could be, you know, QBI from a partnership, from an
S-Corporation, from a Schedule C. Sole proprietor. The deduction is subject to multiple
limits, and we're going to talk a little bit about that. For example, the type of trade or
business, the taxpayer's taxable income, the amount of W-2 wages is paid with respect to the
qualified trade or business. And unadjusted basis of qualified property held by the trade or
business. Now, this is very important. Taxpayers can take this deduction in addition to the
standard deduction or itemized deduction. And the deduction will be reported on line 9 of the
new 1040. So, in general, a qualified trade or business is any trade or business other
than a specified service trade or business, which we're going to define in a minute. Or the
trade or business of performing services as an employee. So what that means is you can't take
this deduction off of or related to, your wages that would be reported to you on a W-2.
So, let's talk about just what a specified service trade or business is. So, a specified
service trade or business is any trade or business described in internal revenue code section
1202. And some of you may remember section 1202 deals with personal service corporations with
two modifications. And that is 199A removes engineering and architecture. So, what is it? A
specified service trade or business includes trade or businesses that provide services in the
fields of health, law, accounting, actuarial science, performing arts, consulting, athletics,
financial services, or any other trade or business where the principal asset of such trade or
business is the reputation or skill of one or more of its employees or owners. And
just to talk a little bit about that last part, we did issue proposed regulations with regard to
199A on August 8th and on page 166 for those of you that are interested, we actually, and that
is the Treasury Department and IRS narrowly defined reputation or skill. And, so, specified
service with respect to reputation or skill only applies when it comes to a person receiving fees
or compensation for endorsing products or services, individuals that get paid for their
likeness, their name, their signature, their trademark, or appearing at an event such as radio,
television, or other media formatted show. So, in addition, a specified service trade or
business on the next slide is also any trade or business which involves a performance of
services that have to do with investing, investment management, trading, or dealing in
securities. But one of the key things you'll see on the next slide is, and this is probably the
most important slide in the presentation. And it has to do with the thresholds. Okay? And,
so, there is a lower threshold, and then there's sort of a phase in, phase out threshold, and
then there's an upper threshold that's based on taxable income. So the specified service
exclusion does not apply to taxpayers who's taxable income is less than $157,500 or $315,000
married filing jointly. So what that means is, regardless of if it's law, health, accounting,
regardless of the individual's trade or business or occupation, right? They're going to get the
deduction. Right? They're going to get the 20%, but there's another limit that we're going to
talk about on another slide. And then the deduction is reduced for taxpayers that are
in a specified service trade or business if they're between $157,500, and $207,500, and $315,000
and $415,000 married filing jointly. And income from a specified service trade or business is
not income from a qualified trade or business with taxable income above $207,500 or $415,000
married filing joint. So what that means is that there is no 199 cap A deduction for
individuals that are in those fields of law and health, and consulting, et cetera if you're
above those taxable income thresholds. So on the next slide, and we believe this slide
really applies to the vast majority of Americans. The deduction for taxpayers with taxable
income below the lower threshold amounts of $157,500, or $315,000 married filing jointly,
regardless, and I stress that, regardless, and I stress that, regardless of the qualified type of
trade or business is the lesser of 20% of qualified trade or business income plus 20% of
qualified REIT dividends and qualified publicly traded partnership income or 20% of the excess of
taxable income over net capital gains. So on the next slide, there are other limitations for
those folks that have taxable income between $157,500 and $207,500. And the $315,000, and
$415,000, married filing jointly. So the deduction is Eye reduced based on wage and basis
limitations. So it does get more complicated here. For these taxpayers, the amount determined
for qualified business income is limited to the greater of 50% of wages from the qualified trade
or business or 25% of wages plus 2.5% of the unadjusted basis of qualified property from a
qualified trade or business. So, just couple of other special rules to be aware of.
There are rules for cooperatives. You know, we're working on additional guidance here at the
IRS and Treasury with regard to agricultural and horticultural cooperatives because they're
going to be allowed for a deduction for domestic production activities. So I had mentioned
before that the IRS issued proposed regulations on August 8th. We also issued FAQs on that
date. As well as a news release. And so those informations are available if you need to learn
more about the 199A deduction. And we do anticipate issuing more help for taxpayers in the form
of guidance before December 31st. So Philip, I know that was quite a bit of information. But
how about we go ahead and do one final polling question today? PHILIP YAMALIS: Okay,
John. I agree. That is a lot of information. But awesome information, and I agree that this
is the perfect time for our final polling question. Let's do it. Our fourth and final polling
question is: Which of the following statements is true regarding Qualified Business Income?
Here are your choices. Is the correct response A, 199A applies to qualified publicly
traded partnership income? Let me repeat that. A, 199A applies to qualified publically traded
partnership income? B, Qualified Business Income is the net amount of qualified income, again,
deduction and loss for any qualified trade or business? C, the specified service exclusion does
apply to taxpayers who's income is less than $157,500 or a $315,000 for married filing jointly.
And D. A and B. Or E, A, B, and C. Take a minute, to click on the radio button you believe
most closely answers the question. Which of the following statements is true regarding
Qualified Business Income. Again, do you think the correct response is A, 199A applies to
qualified publically traded partnership income? B, Qualified Business Income is the net amount
of qualified income, gain, deduction, and loss for any qualified trade or business? C, the
specified service exclusion does apply to taxpayers whose income is less than $157,500, or
$315,000 if they're married filing jointly. D, A and B. Or E, A, B, and C. Okay, hopefully,
you've completed it and filled in the button for the correct answer. Let's stop the polling
now. We'll share the correct answer on the next slide. And the correct answer is D. Both A
and B. And this is because of the specified service exclusion does not apply to taxpayers whose
income is less than $157,500, or $315,000 for married filing joint which then would make C a
false statement. Okay. So let's see how you did. Okay. 32%. Yes. 32% of you
responded correctly. So that could tell us that we're either having technical issues or let me
do it this way. John, just give me a quick clarification on why the answer here would be A and
B. JOHN TUZYNSKI: Yeah, no thanks Philip. Thanks. I think, you know, C is obviously
is the issue here. So this statute was designed so that below that lower threshold, those
numbers $157,500 and $315,000, it doesn't matter if the trade or business of the taxpayer.
Okay? So we talked about those specified services. So regardless any taxpayer below those
levels would be entitled to take the 199A deduction. So it could be the way this is worded
where it says the specified service exclusion does apply to taxpayers below that. And maybe
it's just the way it was phrased, but I mean I think the takeaway from this, Philip, would be
that below that lower threshold taxable income level, individuals will be entitled to the 199A
deduction subject to the lesser of the 20% of their QBI compared to the 20% of their taxable
income less net capital gain. So, again, for those that got that wrong and need more
information, there is additional information available on IRS.gov. PHILIP YAMALIS:
Okay and that's very well stated. Of course we will have time for question and answers at the
end of our broadcast as well. So with that, Richard, let me turn it over to you to take us
home. RICHARD FURLONG: Well,thank you, Philip. Now the next topic, code section 274
and how it was impacted by the Tax Cuts and Jobs Act. This was not one the topics we had
originally planned to discuss. But John and I and our webinar team thought it was important to
address this topic, particularly in light of some significant with transitional guidance that
has been released in the past four weeks. So under the new law, the deduction for business
meals and entertainment has been impacted for amounts incurred or paid after December 31, 2017.
In other words, the amounts paid for, specifically for entertainment beginning in 2018.
Because as you can see on this slide, no longer under revised code section 274 can a trade or
business deduct what are considered to be entertainment, amusement, and recreation business
expenses. Those are no longer deductible. And that is a significant change. Now, on our next
slide, just to remind you about the deductibility of business meals, because business meals still
may be deducted, and by meals, again we mean food and beverages. But only 50% of the cost of
those business meals if they meet these 3 requirements. Either the taxpayer or an employee of
the taxpayer is present at the furnishing of the meals. And the meals are provided to either a
current or potential client, a customer, or a business contact. And, of course, timely, the
food and beverages are not considered lavish or extravagant. They're ordinary and necessary
expenses that are not lavish or extravagant. And if they meet those conditions they're
deductible, at 50% of the cost incurred. So what has changed and I think this next slide is
very important and this is the reason why we added it. Specifically, that transitional guidance
that you see there. Notice in 2018-76. It was announced on October 3rd of 2018 And it says,
that in that guidance, and it's referred to as transitional, because within the 9 pages of the
notice, the Service is indicating that we intend to issue I understand casing we wish you
proposed regulation subsequently. But for the time being, taxpayers can rely on the guidance in
the notice and determine what is considered deductible meals and what is considered
non-deductible entertainment expenses. So entertainment expenses will not be considered
non-deductible entertainment if those entertainment expenses are purchased separately from the
event or stated separately from the cost of the event on one or more bills, invoices, or
receipts. So just quickly let me give you an example. quickly. Let's say a business
takes out a customer, client, potential customer to a ballgame. And at the ballgame, they pay
for the tickets. That is entertainment and that is no longer deductible beginning in 2018.
However, if at the ballgame, the business owner buys hot dogs and Coke, and other refreshments
for the customer, because they're purchasing them separately, those are deductible meals subject
to the 50% limitation. And there are several examples in the notice. I recommend it to you
because I do think this transitional guidance goes a great way clarifying some ambiguities that
were out there prior to the guidance. And then the final topic I want to touch on
briefly is a change to the gift and estate tax exclusion amount. Now under the new law, the
basic exclusion amount under code section 2010 (C)(3) that is applicable at the time of the
decedent's death has been essentially doubled. The basic exclusion amount It goes from $5
million per taxpayer and that is amount is indexed for inflation and has been. And now it's
doubled to $10 million indexed for inflation. So for 2018, And now the basic exclusion amount
adjusted for inflation amount is $11,180,000. And that translates into and estate tax credit of
just about $4.4 million. Now this is a temporary provision. So this doubling of the basic
exclusion amount expires as of December 31, 2025. And then finally I have several slides here
on the enormous amount of resource that is we have on the tax reform page at IRS.gov. And you
can see the web address there. We highly encourage you to bookmark it as Philip said in the
opening remark. It's been redesigned this summer. It's very easy to navigate through the
website, depending upon your interest and the area of tax reform that you're interested in,
whether you're an individual, a business, or perhaps a tax-exempt entity. And on our next slide,
we see some of the resources. Many of these bullets you see on this slide can be referenced on
the landing page for tax reform on the left-hand side. So we're always adding information to the
tax reform page. We have a very dedicated group of individuals working on the web design, on
guidance in the form of news releases, fact sheets, tax tips, and I'll make one pitch for our
subscription services that you see there. You know, we have many, many tax professionals around
the country on today's webinar. And we in the outreach function of IRS are always encouraging
those tax pros to sign up for the weekly e-News for tax professionals. And particularly this
year, with all of the significant changes under the new law impacting you and your clients, to
get that information on a weekly basis, on Friday afternoons is very beneficial. If you're an
industry, we have news for small business. Again, I recommend it because we're always looking to
share this information on a regular basis. So check out our subscription services on IRS.gov.
And with that, Phil, let me turn it back over to you for our question-and-answer period.
PHILIP YAMALIS: Thanks, Richard. Alright so, we'll continue with our
question-and-answer session. I'll be your moderator for this session. We have two subject
matter experts with us today to answer your questions from SBSE counsel we have Chuck Hall. And
from Field Exam Small Business Self-Employed we have Program Manager, Joe Tiberio Gentleman,
thanks for join us this afternoon. So before we begin the question-and-answer session, I want
to mention again that we will not have time answer all the questions submitted during this
webinar. However, let me assure you, we will answer as many as we have time for and we will at
some time or another follow-up on many of your questions you asked today. Please note if you're
participating to earn a certificate and related continuing education credit, you'll qualify by
participating for at least 50 minutes from the official start time of this webcast. So
unfortunately, you can't include the first few minutes of chatting we engaged in at the beginning
of the session. Sorry about that. Alright everyone. Like I said we've received quite a few
questions. So let me get started and let's get to as many as possible in the next few minutes.
So, let me begin with you, Joe. And I know we repeated it, but the specific publication for
levies, since a lot of our audience may not be familiar with the collection process. Can you
remind us what that specific publication where levies are covered? Joe, we might ask you to turn
your microphone on there for us. JOE TIBERIO: Okay. Can you hear me now?
PHILIP YAMALIS: I sure can. Thank you. JOE TIBERIO: Great. Sorry about
that. So during the presentation, publications, a couple were mentioned. Publication 4528,
4528, and 4235 were mentioned relative to this change specifically for the administrative claim
for wrongful levies. But also there's a really good resource. Publication 594, is an overview
of the collection process. And I think that would be very valuable for any practitioner who,
especially, someone who does not routinely work on those kinds of cases, if they do have a client
that's in a collection, involved with a collection action. So pub 4528, pub 4235 and finally
publication 594. In addition to on IRS.gov there's a levy page which actually has all kinds of
information about levies that's dealing with really almost anything, any questions would you
have such as what is a levy? How do I avoid a levy? How do I get a levy release? What if a levy
is causing a hardship, et cetera. I do also want to mention, I did talk about one of the
publication numbers that I gave is the collection of advisory group numbers and addresses in each
state. And that's going to be a really good resource for a practitioner who does needs to get
a hold of someone in collection relative to a levy. Someone local to talk about their client's
situation. PHILIP YAMALIS: Excellent, Joe. Thanks. Excellent references. And,
again, key word search is "Levies" in the key word search box. This will get you right to that
page. Excellent, Joe. Thank you for that. Chuck, let me ask you on depreciation. The question
came in here. Do luxury autos qualify for bonus depreciation? So do they qualify for 100%?
CHUCK HALL: Yes, they do qualify for bonus depreciation. If bonus depreciation is
elected, the allowable depreciation is decreased by $8,000 to $18,000 the first year. So if
bonus depreciation is not elected, then the depreciation for first year would be just be
$10,000. PHILIP YAMALIS: Okay. So just some clarification on bonus depreciation.
So we're saying now that you can now take the section 179 deduction for roofs, HVAC and
security system and, et cetera? That's new? CHUCK HALL: Yes, one thing the Tax Cuts
and Jobs Act did was change the definition for Section 179 property. And that includes certain
improvements to non-residential real property placed into service after the property is placed
into service. Now this would includes roofs, HVAC systems, fire protection systems, alarm
systems, and security systems. So, yes,, those items are now eligible for a section 179.
PHILIP YAMALIS: Excellent. Excellent. Thanks, Chuck. Here, let me ask you another
question. A question came in on like-kind exchanges Section 1031. How does the new law apply
to intangible assets? JOE TIBERIO: Wow, that's a good question, Phil. And I think
we touched on a little bit during the presentation. I think Richard covered that to a point.
But there was a lot of information there. So the big change here was the removal of personal
property from the, as eligible for like-kind exchange. And so that personal property, we always
think of that as vehicles, machinery, equipment, if things like that. But personal property,
that definition for purposes of like-kind exchange also includes intangibles such as patents,
intellectual property and such. And, so, those will no longer qualify for like-kind exchange
treatment as a result of the new tax law effective 1/1 2018. PHILIP YAMALIS:
Excellent. Alright let's take it to the Qualified Business Income deduction. A question
asking for clarification. What forms do we use to figure the Qualified Business Income
deduction in? JOE TIBERIO: Phil, that's a good question. So there's actually for
tax year '18, there will not be a form, a numbered form you will typically expect to see.
Instead, there will be a worksheet in the Form 1040 instructions. The worksheet will, along
with line-by-line instructions, that go along with that worksheet to do the computation. And
for those, for some taxpayers, that worksheet in the 1040 instructions will satisfy most of our
audience's clients. However, for those that have a more complex situation, maybe they're over
the threshold or in part of the phase in or phase out within those threshold amounts, there will
be a more involved worksheet. And that will be in a publication, which is yet to be released.
It'll publication 535. So that'll be coming out here in the near future. And regardless of
whether you use the simple worksheet or the more complex one in the publication, you'll carry
that amount, the deduction amount to the face of the 1040. Right directly to the 1040. It will
have its own line. There will be a Qualified Business Income deduction line on form 1040 to
claim that. And I think it was mentioned during the presentation, that's separate and apart
from the standard deduction and the itemized deduction. So it will be a standalone for the
deduction on the 1040 itself. PHILIP YAMALIS: Above the line then. So we'll see the
deduction right on the 1040. Excellent. Excellent. Alright now I'm getting cued that that's
all the time we have for questions, believe it or not. So no worries. We are going to look at
your questions. We might even possibly see some Frequently Asked Questions added to our website.
We might even have a session again later to answer some of these questions. But most of all
today, I want to thank our presenters, John Tuzynski, Richard Furlong for their excellent
presentation and a big thank you to Chuck Hall, Joe Tiberio for answering some of our questions
this afternoon. We really appreciate all of you for sharing your knowledge with all of us.
Thank you once again. John and Richard, before we close the question and answer session. What
are some of the most important points that you want our attendees to remember from today's
webinar? John, let me start with you. Go ahead. JOHN TUZYNSKI: Thanks, Phillip. The
first thing I would say is the section 179 maximum deduction is now $1 million. And to the
extent that an individual wants to claim the bonus depreciation, you can do it on used property.
Joe talked about the 199A deduction, it's in addition to the standard or itemized deductions.
And just remember if you're below those lower thresholds that we talked about, it doesn't
matter if you're in one of those occupations as a specified service trade or business, you're
going to get the deduction subject to the taxable income limitation. So. PHILIP
YAMALIS: Awesome. Awesome. You're reemphasizing the point that we didn't like answer C there.
It was a false statement. So thanks again. I really appreciate that there, John. Richard,
why don't you provide some of your most important points for us. RICHARD FURLONG:
Certainly, Phil, and just to remind everyone that there is additional time now to contest a
wrongful levy, that's been increased to two years if the IRS still has the levied money or has
sold the levy property. However, if we still have the levy real property, there is no time
limit to contest that levy. Like-kind exchanges as we discussed are limited now to real
property. No longer can personal property whether they're tangible or intangible qualify for
like-kind exchange treatment. As always, like-kind exchange real property must be of the same
nature or character to qualify. A doubling of the gift and estate tax basically exclusion
amount to $10 million from $5 million per decedent. And then finally a reminder about the
interim guidance dealing with the changes to meals and entertainment. It's Notice 2018-76 which
you can find again at IRS.gov/taxreform. And Phil, I'll turn it back over to you.
PHILIP YAMALIS: Thanks, Richard. Again excellent presentation John and Richard. Thank you so
very, very much. For those of you that have attended today for at least 50 minutes, once again,
after the official start time of the webinar, you will receive that certificate of completion
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you're eligible for continuing education from the Internal Revenue Service and you registered
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you're eligible for continuing education from the California Tax Education Council We call it
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