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CRE Questions Unanswered In Treasury Guidance On New Business Interest Deduction Limit

April 11, 2018

GlobeSt.com
By Erika Morphy

The notice does provide some helpful guidance to C Corporations but there are still unanswered questions about commercial real estate investment.

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These are helpful to C Corporations, Montgomery McCracken Senior Tax law partner Gary M. Edelson tells GlobeSt.com. For example, the notice confirmed that disqualified interest disallowed under the prior version of I.R.C. § 163(j) can be carried over and treated as business interest, he tells GlobeSt.com. “It is also helpful to know that for a C corporation, all interest earned by the C corporation will be business interest and that all interest paid or accrued by the C corporation on indebtedness will be business interest.”

What The Notice Doesn’t Say

For real estate investors, however, the notice leaves unanswered some of the key issues related to real estate financing. Edelson says that the notice did not address whether a partner in a partnership that owns real estate could be in an electing real property trade or business based solely on the ownership of partnership interest. “Except for the issue of how a partner would take into account his share of interest earned by the partnership, the notice did not address partnership issues,” he says.

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