Estate Planning and New IRS Centralized Partnership Audit Rules: Impact on Trusts Holding Partnership Interests

Opt-Out Provisions and Limitations, Designating Partnership Representative, and Alternatives to Partnerships

A live 90-minute CLE/CPE webinar with interactive Q&A


Wednesday, May 30, 2018 (in 7 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE/CPE webinar will guide estate planning counsel and trust advisers through the impact of the new partnership audit rules on estates and trusts holding partnership interests. The panel will describe the partnership audit rules, discuss the provisions in the regulations that disallow partnerships with trusts as partners from opting out of entity-level audit and assessment rules, and detail planning options and risks for trusts and estates holding partnership and LLC interests.

Description

The new partnership audit rules, which allows the IRS to audit partnerships and assess tax at the entity level, will have a massive impact on trusts holding partnership assets. The widespread use of family partnerships, in particular, will require estate planning counsel and advisers to evaluate their wealth transfer structures to determine whether existing trusts face exposure to tax liabilities arising from prior years operations of partnership investment and business operations.

The new audit regime mandates entity-level audits and assessments of all businesses operating as partnerships and filing Form 1065. Under the rules, specific partnerships can elect out of the centralized audit process, as long as all partners are eligible. However, the regulation explicitly excludes trusts—whether revocable or irrevocable—from the definition of “eligible partners” who may opt out of the new audit regime.

The new rules would require partnerships, including tiered structures, to appoint a single representative to respond to audit inquiries and act on any assessments. Partnerships which are assessed tax must choose between paying an entity-level tax, or “pushing out” the adjustment to its partners, who must then recalculate their tax liabilities to account for their share of the assessment.

For trusts holding partnership assets, the inability to opt out of the new audit regime creates the potential for unforeseen and adverse tax consequences. Estate planning advisers must examine the structure of trust partnership holdings to avoid potentially costly tax exposure.

Listen as our expert panel provides a practical look at the estate planning challenges arising from trust ownership of partnership shares under the new centralized partnership audit rules.

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Outline

  1. Detailed discussion of new audit rule provisions
    1. TEFRA regime: audit implications at the partner level
    2. New rules: audits conducted and assessments made at the partnership level
    3. Opt-out provisions/procedures/limitations
  2. Tax impact of new rules on trusts and family limited partnerships
  3. Modifications and elections for existing partnerships holding trusts
    1. Selection of partnership representative
    2. Defining and limiting partnership representative’s authority to act
    3. Determining whether to make “push-out” election
  4. Alternate procedures for partnerships seeking to opt out of entity-level assessments
  5. Evaluating existing partnership structures in an estate plan
  6. Impact on current estate plans and alternatives to partnerships in estate planning

Benefits

The panel will review these and other key issues:

  • The potential tax impact of the new centralized partnership audit rules on family partnerships and trusts which hold partnership assets as part of a wealth transfer plan
  • Determining whether a family partnership is eligible for an election out of the centralized audit regime
  • Necessary elections and changes to partnership operating documents, including selection of a partnership representative, limiting the scope of the representative’s authority and deciding whether to require pushouts of audit assessments as part of a revised partnership agreement
  • Alternative strategies to minimize potential tax exposure under the new audit rules

Faculty

Cohn, Beth
Beth S. Cohn
Shareholder
Jaburg Wilk

Ms. Cohn chairs the firm’s Estate Planning and Business Law Department. As both a Tax Specialist certified by the...  |  Read More

Kmiecik, Mark
Mark G. Kmiecik
Shareholder
Davis & Kuelthau

Mr. Kmiecik is a corporate attorney and advises clients on international, federal, state, and local tax matters,...  |  Read More

Smitha, Thomas
Thomas L. Smitha
Associate Director of Tax Services
Berkowitz Pollack Brant Advisors and Accountants

For more than 30 years, Mr. Smitha has provided accounting services, tax planning, and consulting and tax structuring...  |  Read More

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