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‘Siloing’ NOLs against UBTI explained

The IRS clarified, in frequently asked questions on its website (available at irs.gov), the treatment by tax-exempt organizations of the five-year carryback of certain net operating losses (NOLs) permitted for NOLs in tax years 2018 through 2020 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. The FAQs address how NOLs are deducted from unrelated business taxable income (UBTI) by organizations with more than one unrelated trade or business, both in years subject to calculation of UBTI with respect to each trade or business separately ("siloing") or in the aggregate. The siloing requirement took effect in tax years beginning after Dec. 31, 2017, due to enactment of Sec. 512(a)(6) by the law known as the Tax Cuts and Jobs Act, P.L. 115-97 ("TCJA years"). The IRS provides in the FAQs that such organizations must silo their CARES Act NOLs carried back to a TCJA year. NOLs carried back to pre-TCJA years may be deducted from aggregate UBTI. Any portion of CARES Act NOLs remaining after this earlier carryback and then applied to a TCJA year must be siloed.

'Incidental' personal property allowed in like-kind exchanges

Treasury and the IRS issued proposed regulations (REG-117589-18) to reflect changes to Sec. 1031 made by the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97. The TCJA substituted "real property" for "property" throughout Sec. 1031, which for exchanges completed after Dec. 31, 2017, generally forecloses like-kind exchanges of personal and intangible property that is not considered part of real property. In answer to inquiries whether replacement real property that includes some personal property causes taxpayers to constructively receive funds held by a qualified intermediary from the disposition of relinquished property, the proposed regulations provide that personal property that is incidental to replacement real property is disregarded in determining taxpayers' rights to receive, pledge, borrow, or otherwise obtain the benefit of money or property held by a qualified intermediary. Personal property is incidental for this purpose if, in standard commercial transactions, it is typically transferred with the real property and the personal property's aggregate fair market value (FMV) does not exceed 15% of the aggregate FMV of the replacement real property.

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