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Partnership Allocations for Real Estate Entities: Special Allocations, Section 704(b) DROs and QIOs, Nonrecourse Debt

A live 110-minute CPE webinar with interactive Q&A

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Tuesday, June 18, 2024

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

Early Registration Discount Deadline, Friday, May 24, 2024

or call 1-800-926-7926
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This webinar will explain meeting tax compliance obligations for partnership allocations to LLC members and partners. Our authoritative panel of real estate professionals will break down the complex rules for nonrecourse deductions, special allocations, and 704(b) compliance for tax advisers working with real estate investors.

Description

A partnership or LLC structure provides real estate investors the flexibility they need to make unusual but necessary distributions and income allocations. The price of this flexibility includes a labyrinth of challenging calculations and considerations.

Real estate partnerships and LLCs are required under IRC Section 704(b) to make tax allocations to partners and members that have substantial economic effect. Before Section 704(b), investors sought to minimize or eliminate taxes paid by aggressively allocating losses to taxable partners and gains to tax-exempt or low-bracket partners. Operating agreements must now contain a DRO, deficit restoration obligation, or a QIO, qualified income offset. 704(b) considerations are only one of many highly complex compliance obligations tax advisers to real estate investors must consider. To meet these requirements, many real estate agreements contain targeted allocation provisions to ensure the partners' intended cash distribution goals are met while complying with existing tax provisions.

Another benefit of real estate partnerships is being able to use nonrecourse debt to increase partners' basis. This can generate additional deductions for these partners but also can trigger minimum gain, the excess of a property's nonrecourse debt balance over its book value, and the relative minimum gain chargeback. Partnership allocations for real estate entities are complex. Tax practitioners working with owners of real estate need to understand how special allocations affect the tax consequences of investors.

Listen as our panel of real estate experts explains partnership allocations for real estate entities, including QIO and DRO requirements under Section 704(b), minimum gain chargebacks, and targeted allocations unique to real estate investors.

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Outline

  1. Partnership allocations for real estate entities: introduction
  2. Section 704(b), substantial economic effect
  3. Special allocations
  4. Nonrecourse deductions
  5. Minimum gain
  6. Section 469, passive loss limitations
  7. At-risk limitations
  8. Recapture of losses

Benefits

The panel will cover these and other critical issues:

  • Meeting the substantial economic effect provisions of Section 704(b)
  • Calculating minimum gain and minimum gain chargeback
  • Identifying targeted allocations in partnership agreements
  • Caveats of nonrecourse debt for real estate investors

Faculty

Alfonsi, John
John T. Alfonsi, CPA
Managing Director
Cendrowski Corporate Advisors

Mr. Alfonsi has 25 years of tax consulting, business valuation, litigation support and forensic accounting experience....  |  Read More

Gilbert, David A.
David A. Gilbert
Partner
Pierson Ferdinand

Mr. Gilbert represents domestic and international clients in a wide range of federal, state, and local tax matters. He...  |  Read More

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