IRC 732(d) Partnership and LLC Basis Adjustments for Tax Counsel

Mastering Elective and Mandatory Basis Adjustments on Distributed Property Absent a Partnership 754 Election

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Thursday, February 23, 2017
Recorded event now available


This CLE/CPE webinar will provide tax counsel with comprehensive guidance on navigating the rules governing mandatory Section 732(d) basis adjustments on distributed property by partnerships where there is no Section 754 election in place. The panel will discuss the application challenges surrounding the basis adjustments, and offer practical tips on when to utilize available elections under Section 732(d) to avoid costly and unanticipated tax consequences.

Description

Determining the tax consequences of distribution of property by a partnership to a partner is a constant challenge for tax counsel and advisers. Section 754 provides an election allowing a partnership to adjust the basis of its assets when the partnership either distributes property or a partner transfers an interest in the partnership. However, there are instances where partners must make basis adjustments in distributed property even absent a Section 754 election. This is where the basis rules of Section 732(d) come into play.

Section 732(d) applies when a partnership that has not made a 754 election distributes property to a partner who would be entitled to make a positive 743(b) adjustment to that property if a 754 election were in place. In distributions where Section 732(d) is applicable, the distributed property receives a basis adjustment as if the 743(b) adjustment were in effect.

Section 732(d) and its regulations provide for either elective or mandatory basis adjustment, depending on the circumstances. However, the rules can be complex, and the IRS has the option of challenging the adjustment decision on a facts and circumstances basis.

Listen as our experienced panel provides thorough and practical guidance to navigating the basis rules of Section 732(d) in distribution scenarios where a Section 754 election is absent. The webinar will provide tax counsel with useful tools for structuring operating agreements and distribution provisions to avoid costly tax consequences.

Outline

  1. Section 732 basis rules
  2. Elective 732(d) basis adjustments
  3. Mandatory 732(d) adjustments
  4. Specific illustrations
    1. Partnership terminations
    2. Nonliquidating distributions with 732(d) adjustment
    3. Liquidating distribution with 732(d) adjustments
  5. Structuring issues

Benefits

The panel will discuss these and other important topics:

  • Under what circumstances do the regulations require partnerships to apply Section 732(d) special basis adjustments?
  • What are the mechanics for making an elective application of the Section 732(d) basis adjustment?
  • What are the rules for basis shifting from longer-lived to shorter-lived property?
  • What are the ordering rules for 732(d) basis allocation among multiple distributed properties?

Learning Objectives

After completing this course, you will be able to:

  • Identify distribution scenarios in which a Section 732(d) basis adjustment is mandatory
  • Determine whether to make an elective Section 732(d) basis adjustment on distributed property
  • Allocate basis adjustments among multiple distributed properties
  • Recognize the impact of the elections on depreciation when partnership interest or property is distributed or sold

Faculty

William C. Lentine, Member
Dykema Gossett, Bloomfield Hills, Mich.

Mr. Lentine is experienced in corporate tax matters, partnership taxation, mergers & acquisitions and estate planning for executives and high net worth individuals. He has experience in corporate governance issues including choice of entity considerations, shareholder/director meetings, Dodd-Frank Act compliance and other general corporate law matters, as well as with public and private mergers and acquisitions and assisting foreign companies in establishing U.S. operations.

Dina A. Wiesen, Senior Manager, National Tax Office, Passthroughs
Deloitte Tax, New York

Ms. Wiesen specializes in partnership taxation, specifically the use of partnerships and limited liability companies in domestic and cross-border mergers and acquisitions and restructurings. She joined Deloitte Tax LLP’s National Tax Office from Cadwalader, Wickersham & Taft LLP where she was an associate in the Tax Department, focusing on matters relating to the taxation of financial instruments and derivatives.


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Tax Law Advisory Board

Robert S. Barnett

Partner

Capell Barnett Matalon & Schoenfeld

William H. Byrnes

Associate Dean, Special Projects

Texas A&M University Law

Robert A.N. Cudd

Senior Partner

Polsinelli

Patrick Derdenger

Tax Partner

Steptoe & Johnson

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Lynn Fowler

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Morrison & Foerster

Daniel L. Gottfried

Partner

Hinckley Allen

J. Leigh Griffith

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Waller Lansden Dortch & Davis

L. Andrew Immerman

Partner

Alston & Bird

Mark S. Lange

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BakerHostetler

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Lori Mathison

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Suzanne Ross McDowell

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