If you and a partnership or S corporation in which you hold an interest are treated as a single person for purposes of the gross receipts test, aggregate the partnership’s or S corporation’s gross receipts with your gross receipts. For this purpose, all members of a controlled group of corporations (as defined in section 52(a)), and all members of a group of businesses under common control (as defined in section 52(b)), are treated as a single person and all members of an affiliated service group (as defined in sections 414(m) and (o)) shall be treated as a single person. Gross receipts aggregation for members of a controlled group, businesses under common control, or members of an affiliated group.įor section 163(j), gross receipts may include the receipts of more than one taxpayer. The gross receipts of an organization subject to tax under section 511 only include gross receipts taken into account in determining its unrelated business taxable income. In that case, see Gross receipts aggregation for members of a controlled group, businesses under common control, or members of an affiliated group, later. For individuals and for section 163(j) only, gross receipts do not include inherently personal amounts such as disability benefits, social security benefits, and wages received as an employee and reported on Form W-2.įor section 163(j), a taxpayer with an ownership interest in a partnership or S corporation must include a share of the partnership’s or S corporation’s gross receipts, in proportion to the partner’s distributive share of items of gross income or S corporation’s shareholder’s pro rata share of gross receipts, unless the partner and partnership, or S corporation shareholder and S corporation, are treated as a single person. Gross receipts for any tax year must be reduced by returns and allowances made during the year. In the case of any taxpayer, which is not a corporation or a partnership, and except as provided below, the gross receipts test is applied in the same manner as if such taxpayer were a corporation or a partnership. See Regulations section 1.163(j)-3(c) example 4 and Temporary Regulations section 1.163-8T.Īdding the gross receipts for the 3 prior tax years, and The proportion of each activity’s business interest expense that is disallowed is the same proportion as the disallowed business interest expense over the total business interest expense. If a taxpayer’s deduction for business interest expense is limited under section 163(j) and such taxpayer has more than one business activity for purposes of either the at-risk (section 465) or passive activity loss (section 469) limitation provisions, then the section 163(j) limitation will apply to the overall business interest expense from all the business activities of the taxpayer. See Regulations section 1.163(j)-3 for additional information on interactions of section 163(j) with other code provisions relating to interest expense. ![]() Section 163(j) applies after any basis limitation and before the operation of the at-risk, passive activity loss, or excess business loss limitations. If a safe-harbor election is made for a CFC group, Form 8990 does not need to be filed for each CFC group member, but Form 8990 must be filed for the CFC group.Īn expense that has been disallowed, deferred, or capitalized in the current tax year, or which has not yet been accrued, is not taken into account for section 163(j) purposes. See Regulations section 1.163(j)-7(b).įor a CFC group, an additional Form 8990 must be filed for the CFC group to report the combined limitations of all CFC group members. ![]() shareholder of an applicable controlled foreign corporation (CFC) that has business interest expense, disallowed business interest expense carryforward, or is part of a CFC group must generally apply section 163(j) to the applicable CFC and attach a Form 8990 with each Form 5471. A taxpayer (including, for example, an individual, corporation, partnership, S corporation) with business interest expense a disallowed business interest expense carryforward or current year or prior year excess business interest expense must generally file Form 8990, unless an exclusion from filing applies.Ī pass-through entity allocating excess taxable income or excess business interest income to its owners must file Form 8990, regardless of whether it has any interest expense.Ī regulated investment company that pays section 163(j) interest dividends (see Regulations sections 1.163(j)-1(b)(22)(iii)(F) and 1.163(j)-1(b)(35)) must file Form 8990.Ī taxpayer that is a U.S.
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