Simultaneous Equations for Simpler Tax Analysis
11 Pages Posted: 20 Dec 2018
Date Written: October 29, 2018
The tax code limits some tax deductions to a fixed percentage of the taxpayer’s taxable income. When multiple income-based limitations apply to a taxpayer at the same time, without specified ordering rules, the IRS has solved simultaneous equations to give proper effect to all the limitations.
This Special Report in Tax Notes discusses the simultaneous equation solutions for some new income-based limitations introduced by the Tax Cuts and Jobs Act of 2017, which apply to net operating losses (NOLs), global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), business interest expense under section 163(j), and the section 199A passthrough business income deduction. No linear algebra is used in the report.
Keywords: simultaneous equations, net operating losses, GILTI, FDII, section 163(j), section 250, section 199A
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