SILO legislation.

• Author: Laffie, Lesli S.
• Position: AICPA ACTIVITIES

On March 2, 2005, the AICPA wrote to Congress, requesting immediate relief under newly enacted Sec. 470, Limitation on deductions allocable to property used by governments or other tax-exempt entities. Under this so-called "sale-in-lease-out" (SILO) legislation, partnerships with tax-exempt (including foreign) partners are unsure whether losses should be reported as suspended or disallowed when the partnership did not engage in any SILO or other leasing transactions. Schedules K-1 are being held pending guidance.

According to the comment letter, a cross-reference in Sec. 470 to Sec. 168(h)(6) is resulting in unintended consequences to certain partnerships with both taxable and exempt partners. Specifically, by referring to Sec. 168(h)(6), any partnership with an exempt entity as a partner and disproportionate allocations may have become subject to these loss disallowance rules, even though such partnerships have not entered into any leasing arrangements for...