Partnership and trust taxation rules clarified
December 15, 2004
The Nevada Legislative Commission approved regulations Wednesday ensuring partnerships don’t have to pay the state business tax twice.
The taxation regulations also make it clear that personal trusts created for purposes such as estate planning aren’t classified as businesses and that a married couple operating a small business from home is exempt from the tax a partnership would pay.
Senior Deputy Attorney General Greg Zunino told the commission those were areas of the 2003 business-tax law that have raised numerous complaints and questions. He said the law appeared to require not only the partnership itself, but each partner get a business license. He said they resolved the problem by relying on U.S. tax code definitions and requirements.
“Basically, if the Internal Revenue Service disregards the entity for purposes of taxation, the Department of Taxation will also disregard the entity for business-tax purposes,” he said.
The other issue centered on when a trust is required to get a business license. Lawmakers agreed they never intended to require personal trusts created for estate-planning purposes to pay business licenses and taxes. Zunino said the regulation was written to clarify that trusts don’t require licensing under the law unless they are “doing something more than generating interest.”
“In a nutshell, a trust would not be required to secure a business license unless it is conducting an activity that would require a natural person to file with IRS reporting income,” he said.
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That includes “operating a business, running real property or operating a farm.”
Zunino also said the regulation clarifies that a married couple will be treated the same as an individual instead of as a partnership – exempting a married couple from having to get a business license to operate a home-based business.
Contact reporter Geoff Dornan at email@example.com or 687-8750.