- Illinois clarified that when a partnership sells its assets, the capital gain is subject to the state’s Personal Property Replacement Tax (PPRT) at the entity level and also taxed at the individual owner level.
- The PPRT is imposed directly on entities, including partnerships and S-corporations, at a rate of 1.5% for PTEs and 2.5% for C-corporations, in addition to other state taxes.
- This structure can result in double taxation for individuals conducting business through PTEs, as they pay both the PPRT and personal income tax without credit for the PPRT.
- A taxpayer expressed frustration after being advised to place inherited farmland in a partnership, leading to unexpected double taxation upon sale, which could have been avoided by distributing assets before the sale.
- Illinois dismissed the taxpayer’s arguments that the PPRT should not apply to real estate sales and that the gain should be treated as non-business income.
Source: aprio.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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