Basis Adjustments for Partnerships and LLCs: Tax Law Challenges
Navigating Complex Basis Rules and Avoiding Pitfalls in Section 754 Elections
Recording of a 90-minute CLE teleconference with Q&A
Conducted on Tuesday, August 21, 2012
Recorded event now available
This teleconference will analyze the basis adjustment rules associated with sales, transfers and partnership interests or property distributions; review the impact of the Section 754 election for individual partners and the partnership; and discuss structuring transactions to avoid unintended tax consequences.
Description
Basis in a partnership interest or property can be adjusted when there is a distribution, sale or exchange of property or membership interest pursuant to Code Sections 734(b) and 743(b). A Section 754 election allows a step-up or step-down in basis to reflect the fair market value at the time of the exchange.
This election has the advantage of not creating tax consequences for the new partner on gains or losses already reflected in the purchase price of the interest. However, the 754 election involves complex planning and decisions that can create tension between existing and new partners.
The impact of the 754 election on individual partners must be carefully considered to avoid unintended tax consequences that can be disastrous for partners. Counsel may be called upon to help make important decisions with basis and depreciation issues, and to help make complicated adjustment calculations.
Listen as our authoritative panel of tax advisors guides counsel through the basis adjustment rules, discusses the impact of the Section 754 election on individual partners and the partnership, and provides best practices for avoiding potential pitfalls of the election.
Outline
- Inside and outside basis issues
- Overview
- Ability to make 754 election due to a transfer
- What happens under 743(b) when a 754 election is made?
- 755 basis adjustments
- Basis adjustments for partnerships and LLCs
- 734(b) adjustments for distributions from partnerships
- Making a 754 election
- Other nuances for consideration
- Partnership technical terminations
- Adjustments to basis of a corporate partner's stock
- Contingent liabilities and allocations of basis adjustments
Benefits
The panel will review these and other key questions:
- What are the benefits and disadvantages of making the 754 basis election?
- What are the rules governing step-up and step-down basis adjustments?
- What are the rules for allocating basis adjustments?
- What is the impact of the 754 election on individual partners and the partnership?
- What are common pitfalls in basis adjustments, and what can practitioners do to avoid these pitfalls?
Upon completing this seminar, you will have a better understanding of the complex tax and depreciation issues for partnerships and partners involved with sales of interests and property governed by Section 754. You will have a better grasp of the range of issues to consider with Section 754 elections.
Faculty
Janice Eiseman, Principal
Cummings & Lockwood, Stamford, Conn.
Her practice specializes in taxation of closely held businesses and tax planning for owners and investors, with a particular emphasis on structuring of various business entities. She also has handled tax controversy work before the IRS and New York State tax authorities.
Lynn Fowler, Partner
Kilpatrick Townsend & Stockton, Atlanta
His practice specializes in tax-efficient strategies for a variety of business entity formation, financing, operations and disposition transactions. He has worked with clients frequently on federal income tax credits, and taxable and tax-free M&A transactions.
Ordering
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Tax Law Advisory Board
Tax Partner
Steptoe & Johnson
Of Counsel
Morrison & Foerster
Partner, Federal, State and International Tax Planning
Rogin Nassau
International Tax and Tax Controversies Partner
DLA Piper
Partner and Practice Group Leader - Tax
Waller Lansden Dortch & Davis
Transactional Tax Partner
McKenna Long & Aldridge
Partner, Cross-Border Transactions Tax
Fraser Milner Casgrain
Federal Tax Partner
Nixon Peabody
Partner, Tax-Exempt Organizations
Steptoe & Johnson
Partner, Corporate Tax and Due Diligence
Pepper Hamilton
Partner
Ivins, Phillips & Barker
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Skadden Arps
Peter Stathopoulos
Managing Director, State and Local Tax Practice
Bennett Thrasher
Partner & Co-Chair, State & Local Tax Practice
Sutherland Asbill & Brennan
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