Discussion:Sec 199-Major Subcontractor is a related party
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Discussion Forum Index --> Tax Questions --> Sec 199-Major Subcontractor is a related party
Mark Eason (talk|edits) said: | 29 June 2006 |
| My problem is that my client (construction industry) is a General Contractor, LLC, that Subcontracted 100% of the job to a Related Party (S Corp)(Partners of GC, LLC, have 80% plus control over S Corp). The example at Reg 1.199-3(m)(6)(v)example(1) show the General Contractor and the Subcontractors all being Unrelated. EAG does not apply to construction if I am reading 199 correctly.
Questions: 1. Will General Contractor (GC), LLC, now have DPGR because the related subcontractor is related? (For this question and this question only assume GC provided no oversight. For the following questions, assume GC provided oversight.) 2. Does Related Subcontractor get 199 on its DPGR and W-2 wages from GC, LLC, job? If not, what happens to its DPGR and W-2 wages from the GC, LLC job? 3. What can GC, LLC, pickup from Related Subcontractor if Related Subcontractor cannot use its share of DPGR and W-2 wages from GC, LLC, job? Can GC, LLC, use Related Subcontractor's wages that relate to GC, LLC, job? | |
Mark Eason (talk|edits) said: | 30 June 2006 |
| Update:
Our RIA Rep sent me to 199-9 to tiered structure of pass thru entities. This does not apply here. Both the GC, LLC and the Related Subcontractor (S Corp) are owned by the same individuals. I believe this is a subcontract issue not an ownership issue. How close is subcontracting to leasing the employees? If this was a co-employee leasing situation, GC, LLC would be getting the wages even though the W-2's would be in Related Subcontrator's name. Mark Eason 08:38, 30 June 2006 (CDT)Mark Eason | |
| 30 June 2006 | |
| What is the reason that they don't have it set up as an employee leasing situation? | |
Mark Eason (talk|edits) said: | 5 July 2006 |
| Client is changing for 2006. This is for a 2005 extended return. Became a client 01/06.
Mark Eason 13:31, 5 July 2006 (CDT)Mark Eason | |
Mark Eason (talk|edits) said: | 6 July 2006 |
| Looks like I missed the last line of related parties definition for 199. 1.199-3(b)(1) is the definition. Since EAG section says that if you do construction, you are excluded from EAG. It would appear that if you are unrelated for EAG you are unrelated for 1.199-1 to 1.199-9.
Mark Eason 11:07, 6 July 2006 (CDT)Mark Eason | |
