Complex Tax Provisions in LLC Operating Agreements: Minimum Gain Chargeback, Waterfall Allocations, QIOs

Note: CLE credit is not offered on this program

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

Conducted on Wednesday, June 9, 2021

Recorded event now available

or call 1-800-926-7926
Course Materials

This course will examine complex tax clauses in operating agreements to assist tax practitioners in identifying and implementing these key provisions in accordance with partners' expectations and existing regulations.


Provisions allocating minimum gain chargebacks to members are often included in LLC agreements. Allocating minimum gain is complex but required under regulations Section 1.704-2 when a member receives allocations of nonrecourse deductions that lack economic effect. These chargebacks are triggered when a property's basis drops below the loan amount on the property. Tax practitioners must recognize these clauses and know when they come into play to make these offsetting allocations.

Many operating agreements include targeted capital account balances to affect preferential distributions to partners. Partners can receive preferential returns, then the return of capital contributions, and finally distributions relative to their partnership interests. These tiered or waterfall distributions are rife with complexities that must be grasped by advisers working with partnerships and LLCs.

Listen as our panel of partnership veterans walks you through examples of difficult provisions in operating agreements, including waterfall allocations, minimum gain chargebacks, qualified income offsets, and liquidating distributions. Tax practitioners must identify, interpret, and apply the most complex provisions in LLC agreements to properly allocate income, deductions, and gains and losses from dispositions of partnership interests.



  1. Complex provisions in LLC agreements: an introduction
  2. Meeting the regulatory safe harbors
  3. Complex special allocations
  4. Minimum gain chargeback
  5. Qualified income offsets
  6. Liquidation
  7. Other complexities


The panel will review these and other key issues:

  • Identifying waterfall allocation clauses in LLC agreements
  • Determining proper distribution amounts under tiered arrangements
  • Ensuring partnerships meet regulatory safe harbors for allocations


Clayman, Jeffrey
Jeffrey Clayman, CPA, JD, LLM

Tax Senior Manager
Withum Smith+Brown

Mr. Clayman has over 18 years of public accounting experience with a focus on for-profit businesses in many different...  |  Read More

Taylor, Ian
Ian Taylor, CPA, MST
Senior Manager

As a member of RSM's Pass-through Tax Consulting Group, Mr. Taylor focuses on the complex issues faced by...  |  Read More

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