Splitting pass-through businesses

[codykallen]

One potential improvement on the model may be splitting pass-through businesses into S corporations, partnerships, and nonfarm sole proprietorships. This would be a useful step toward later splitting these by industry.

Unlike C corporations, all data should be for all of each business type, rather than just those with net income.

Data on S corporations would come from https://www.irs.gov/statistics/soi-tax-stats-table-1-returns-of-active-corporations-form-1120s

Data for partnerships would come from https://www.irs.gov/statistics/soi-tax-stats-partnership-statistics-by-sector-or-industry

Data for nonfarm sole proprietorships would come from https://www.irs.gov/statistics/soi-tax-stats-nonfarm-sole-proprietorship-statistics

Data on these are available beyond 2013, so we should start with 2014 data.

[codykallen]

Correction: S corporation data comes from https://www.irs.gov/statistics/soi-tax-stats-returns-of-active-corporations-form-1120s-table-7, and from https://www.irs.gov/statistics/soi-tax-stats-corporation-returns-with-net-income-form-1120s-table-8 for S corporations with net income.

[codykallen]

Due to a complete lack of data, we cannot model farm sole proprietorships.

[codykallen]

The implementation of section 163(j) should be done once the pass-through sector is split. The rules from #110 are:

This issue is to discuss two options for modeling the new section 163(j) limitation on interest expense. It limits the deduction to interest paid to the sum of interest income, floor plan financing (not relevant in general), and 30 percent of adjusted taxable income. Adjusted taxable income is taxable income before:

• Business interest income or expense
• Net operating loss deductions
• Income or deductions not allocable to the trade or business (not relevant)
• Depreciation, amortization or depletion (prior to 2022)
• Interest expense in excess of the limitation becomes interest expense the following year.