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A Big Return to Reasonable Compensation

In this article, Sean Morrison and Miller & Chevalier Member Andy Howlett consider the application of the reasonable compensation standard to the section 199A deduction, highlighting issues that are likely to arise under the Tax Cuts and Jobs Act. "The complexity of new Section 199A, which President Trump signed into law as part of the 2017 tax reform (informally known as the Tax Cuts and Jobs Act), has taken on a celebrity of its own," the authors wrote. "To address the complexities and ambiguities in Section 199A, Treasury and the IRS have issued 247 pages and more than 70,000 words of regulations to complement the less than 5,000 words actually written in Section 199A. While the regulations address many questions inherent in the statutory text, they say little about one of the most significant limitations on the new deduction: reasonable compensation."

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