Disregarded entities and tax liabilities.

• Author: Laffie, Lesli S.
• Position: Regulations

The IRS has issued proposed regulations (REG-106681-02) on qualified real estate investment trust (REIT) subsidiaries, qualified subchapter S subsidiaries (QSubs) and single-owner eligible entities disregarded as entities separate from their owners. The regulations would clarify that these disregarded entities are to be treated as separate entities for purposes of any Federal tax liability for which they may be liable.

Background: Under the Code and regulations, three types of entities may be disregarded as separate from their owners: qualified REIT subsidiaries (under Sec. 856(i)(2)), QSubs (under Sec. 1361(b)(3)(B)) and single-owner eligible entities (under Regs. Sec. 301.7701-3(a)). A disregarded entity generally is not liable for the Federal tax liabilities of its owner for tax periods during which it is disregarded. However, a disregarded entity...