Alert

Correcting Capital Account Errors on Partnership Returns

A Comprehensive Guide to Corrections, Allocations, and True-Ups of Capital Accounts

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


Wednesday, April 29, 2020

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

or call 1-800-926-7926

This webinar will provide tax professionals and advisers with an in-depth and practical guide to the accounting and tax disclosure requirements to correct and adjust capital account balances. The panel will focus on reconstructing capital accounts in light of the required reporting of negative tax basis capital accounts and the upcoming required reporting of all tax basis capital accounts. The webinar will also cover the interpretation of partnership agreements and guide advisers on applying partnership provisions to corrective entries and tax disclosures.

Description

Maintenance of capital accounts is one of the more challenging tasks for tax professionals advising partnerships. Due to inexperience, changes in advisers, and errors and omissions, capital accounts are often not maintained accurately. Absent corrections and adjustments, such items can lead to misallocation, phantom income, and basis errors. This, coupled with the recent IRS requirement to report any partner's beginning and ending tax-basis capital when either is negative, has left tax practitioners with the burden of reviewing or determining tax-basis capital for all partners.

Even more frustrating is that in many cases, the corrective adjustments to bring the accounts back into balance are not always clear. Moreover, these issues will become even more challenging with the advent of the new partnership audit rules.

Partnership accounting is by its very nature complicated, and some transactions and events will cause difficulties in maintaining capital accounts. Some provisions--including allocations of nonrecourse liabilities, minimum gain chargebacks, and multistate filings--can create problems for tax professionals. Advisers must be able to identify and correct capital account discrepancies from both compliance and reporting standpoints.

Listen as our experienced panel provides an overview of common and uncommon capital account errors and scenarios that need corrective measures, and explains the best steps to take when calculating partners' capital accounts considering the new IRS reporting requirements.

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Outline

  1. Partnership agreement interpretation
  2. New required reporting of negative tax-basis capital
  3. 2020 required reporting of tax-basis capital
  4. Identifying capital account misstatements
  5. Book entries
  6. Tax reporting and disclosures
  7. Interaction with new partnership audit rules
  8. A case study with illustrations

Benefits

The panel will discuss these and other critical issues:

  • Identifying errors, miscalculations, or misstatements in capital accounts
  • Determining and reporting negative tax-basis capital
  • Basis and capital account corrections where a valid Section 754 election was in place
  • Book vs. tax-corrective adjustments
  • Prior year adjustments
  • Impact of new partnership audit rules

Faculty

Colvin, John
John Colvin

Partner
Colvin & Hallett

Mr. Colvin's practice emphasizes federal tax controversies and white-collar criminal defense. He is a frequent...  |  Read More

Dai, Jellia
Jellia Dai
Manager
Ernst & Young

Ms. Dai advises clients on all types of U.S. partnership tax issues, with a focus on complex partnership transactions....  |  Read More

Mandarino, Joseph
Joseph C. Mandarino

Partner
Smith Gambrell & Russell

Mr. Mandarino's practice focuses on corporate, tax and finance law. He is involved with a wide variety of...  |  Read More

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