C. Receiving fees, compensation, or other income for appearing at an event or on radio, television, or another media format.

2. CONSULTING MAY ALSO BE A LOT MORE LIMITED THAN ORIGINALLY THOUGHT.

Per Proposed Regulation §1.199A-5(b) (2)(vii), the performance of services in the field of consulting refers to the provision of professional advice and counsel to assist clients in achieving goals and solving problems.

The subsection adds that “ the performance of services in the field of consulting does not include the performance of services other than advice and counsel” and that the “performance of services in the field of consulting does not include the performance of consulting services embedded in, or ancillary to, the sale of goods or performance of services on behalf of a trade or business that is otherwise not an SSTB (such as typical services provided by a building contractor) if there is no separate payment for the consulting services.”

3. THE PROPOSED REGULATIONS MAKE SEVERAL FRIENDLY CARVE-OUTS FOR REAL ESTATE RELATED ACTIVITIES.

The proposed regulations make specific exclusions for real estate agents, brokers and real estate/property management companies.

Under Proposed Regulation §1.199A-5(b) (2)(x), the performance of services in the field of brokerage services does not include services provided by real estate agents and brokers.

Under Proposed Regulation §1.199A- 5(b)(2)(xi), the performance of services of investing and investment management does not include entities that directly manage real property.

CONCLUSION

The proposed regulations and examples do help to clarify the SSTB definition somewhat. Although some business owners may now breathe a sigh of relief, others may still be left with unanswered questions. With the help of their tax professionals, these business owners will no doubt need to navigate and interpret the proposed regulations themselves to find the answers.

Jonathan Siao (Tax Partner); Julia Chan (Senior Tax Manager); and Steven Diaz (Senior Tax Accountant) are with HCVT, the 5th largest CPA firm based in Los Angeles. Learn more at hcvt.com.

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