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Basis Adjustments for Partnerships and LLCs: Compliance Challenges

Navigating Complex Basis Rules and Avoiding Pitfalls in Section 754 Elections

Recording of a 110-minute CPE webinar with Q&A

Conducted on Wednesday, December 17, 2014

Recorded event now available

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Presentation

This webinar 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 must be carefully considered to avoid unintended tax consequences that can be disastrous for partners. Tax professionals can provide guidance on making important decisions with basis and depreciation issues and making difficult adjustment calculations.

Listen as our authoritative panel of tax advisors discusses the basis adjustment rules, the impact of the Section 754 election on individual partners and the partnership, and best practices for avoiding potential pitfalls of the election.

Inside and outside basis issues
1. Overview
2. Ability to make 754 election due to a transfer
3. What happens under 743(b) when a 754 election is made?
4. 755 basis adjustments
Basis adjustments for partnerships and LLCs
1. 734(b) adjustments for distributions from partnerships
2. Making a 754 election
3. Other nuances for consideration
  1. Partnership technical terminations
  2. Adjustments to basis of a corporate partner’s stock
  3. Contingent liabilities and allocations of basis adjustments

Benefits

The panel will review these and other key issues:

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?