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Bloomberg Law Quotes Rachel Partain on Celebrities Ineligibility for Tax Write-Off

August 10, 2018, Tax Notes

Private equity and hedge funds, lobbyists, and investment bankers are among those shut out of the 2017 tax act's 20 percent deduction, above certain income thresholds, under new IRS proposed regulations. Veterinarians and skilled nursing facilities were also denied the write-off for pass-through businesses—for which income is taxed at the individual owner level—above incomes of $207,500 for single filers and $415,000 for joint filers. Beyond those thresholds, “specified service” businesses are excluded.


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Celebrities: Losers

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Another description of a “specified service” is a business in which the “principal asset” is the “reputation or skill” of at least one employee.

The IRS narrowed the scope of the “reputation or skill” standard so that it only applies when the individual: receives income for endorsing goods or services; is paid for or licenses the use of their image, name, voice, trademark, or other symbol “associated with the individual's identity”; or is paid for making appearances on TV, social media, radio, or other “forums,” according to the proposed regulations.

The guidance confirmed that celebrities selling their names and likenesses as commodities are ineligible for the write-off.

But the IRS's reading of the law represented a win for individuals who started their own service business, who were at risk of getting “trapped by the rule,” said Rachel L. Partain, a member of Caplin & Drysdale, Chartered in New York.

“Now,” she said, “it's pretty tailored.”

To read the full article, please visit Bloomberg Law’s website (subscription required).

Excerpt taken from the article “Lobbyists, Hedge Funds, Veterinarians Lose Out on Major Tax Break” by Lydia O’Neal for Bloomberg Law’s Daily Tax Report.

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