Capital Account Challenges for Partnerships and LLCs: Tackling Calculations and Complex Operating Agreements

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


Conducted on Tuesday, July 21, 2015

Recorded event now available

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Program Materials

This webinar will give tax professionals preparing Form 1065 tax returns a detailed review of the requirements for capital account maintenance for partnerships and LLCs, including a general review of tax allocations, mathematical examples, explanations of operating agreements, and approaches to compliance.

Description

Tax advisers and practitioners preparing Form 1065 Partnership Income Tax Returns are frequently required to interpret a host of provisions in operating agreements and tax regulations that mandate the maintenance of detailed capital accounts.

If tax professionals fail to properly review and apply operating agreement provisions, they risk incorrectly applying key partnership tax rules and creating results that are inconsistent with the business deal intended by the partners or LLC members.

Traditionally, most operating agreements required a layering approach to capital account maintenance. In recent years, the “targeted capital account” method has been found in more and more operating agreements. This newer method based on cash-driven distributions often is less prone to error.

Listen as our experienced panelists provide detailed guidance on interpreting and reporting the capital account provisions in operating agreements and methods available to comply with complex tax regulations.

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Outline

  1. General overview of tax allocation principles and substantial economic effect
  2. Traditional layered approach to allocating income
  3. Targeted capital account approach to allocating income
  4. Allocations for hedge funds and commodity funds
  5. IRS and other taxing authorities views on targeted allocations

Benefits

The panel will review these and other key issues:

  • What are the key tax allocation principles for capital accounts?
  • What is the impact of “substantial economic effect” requirements in making capital account allocations?
  • How should tax pros handle liquidating distributions and deficit capital account restoration?
  • What is the aggregate allocations approach for securities partnerships such as hedge funds and commodity funds?/li>
  • What are the various approaches and challenges to special allocations taken by the IRS and other taxing authorities?

Faculty

Robert A.N. Cudd
Robert A.N. Cudd

Senior Partner
Polsinelli

Mr. Cudd advises both domestic and foreign entities on tax-efficient structures as well as on transactions between...  |  Read More

Stephen Ng
Stephen Ng

Tax – Financial Services
Kaufman Rossin

Mr. Ng focuses his practice on tax matters related to hedge funds, private equity investments, and funds-of-funds. He...  |  Read More

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