IRC 754 Elections for Tax Counsel: Mastering Structuring Considerations of Basis Adjustments

Navigating Complex Basis Rules and Avoiding Pitfalls in Section 754 Elections

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


Conducted on Wednesday, May 31, 2017
Recorded event now available


This CLE/CPE webinar will provide tax counsel with comprehensive guidance on the 754 election for partnerships. The panel will discuss the basis adjustment rules associated with sales, transfers, and partnership interests or property distributions; review the impact of the Section 754 election for individual partners and the partnership; and discuss structuring transactions to avoid unintended tax consequences.

Description

Understanding the Section 754 election and its related basis adjustments is a critical skill for tax counsel serving as advisers to clients owning or managing partnerships. The election allows adjustments on the “inside basis” of assets the partnership owns.

The basis adjustment can have a significant impact when a partnership has an existing 754 election and admits a new partner, has one partner sell a partnership interest, or when the partnership makes a distribution to a partner. The election and adjustments can have different impacts on different partners, so tax advisers need to fully grasp the tax implications of making the election and utilizing the optional basis adjustments.

Tax advisers must not only understand the rules but also the practical calculations, allocations and reporting mechanics of the 754 election. Counsel may be called upon to help make important decisions with basis and depreciation issues, and to help make complicated adjustment calculations.

Listen as our authoritative panel of tax advisers guides counsel through the basis adjustment rules, discusses the impact of the Section 754 election on individual partners and the partnership, and provides best practices for avoiding potential pitfalls of the election.

Outline

  1. The mechanics of a Section 754 election
  2. Inside and outside basis issues
  3. Ability to make 754 election due to a transfer
  4. What happens under 743(b) when a 754 election is made?
  5. 755 basis adjustments
  6. Partnership technical terminations
  7. Benefits

Benefits

The panel will review these and other key issues:

  • Mechanics of making a Section 754 election at partnership level and understanding “inside basis” vs. “outside basis”
  • Benefits and disadvantages of making the 754 basis election
  • Rules governing step-up and step-down basis adjustments
  • Rules for allocating basis adjustments
  • Impact of the 754 election on individual partners and the partnership
  • Common pitfalls in basis adjustments, and what can practitioners do to avoid these pitfalls?

Learning Objectives

After completing this course, you will be able to:

  • Identify the basis adjustments, both mandatory and optional, that accompany a Section 754 election
  • Determine how specific basis adjustments accompanying a 754 election impact existing partners
  • Discern the ordering rules governing the allocation of basis adjustments under the election
  • Recognize the planning and strategic considerations in deciding whether to make a 754 election

Faculty

Professor Bradley T. Borden, Professor of Law
Brooklyn Law School, Brooklyn, N.Y.

Professor Borden’s research, scholarship, and teaching focus on taxation of real property transactions and flow-through entities (including tax partnerships, REITs, and REMICs). He teaches partnership taxation, taxation of real estate transactions and a general income tax course. His work on flow-through and transactional tax theory appears in articles published in many law reviews, and his articles also frequently appear in leading national tax journals. He authored or co-authored several books, including Federal Taxation of Corporations and Corporate Transactions, Limited Liability Entities: a State by State Guide to LLCs, LLPs, and LPs, Tax-Free Like-Kind Exchanges, Taxation and Business Planning for Partnerships and LLCs, and Taxation and Business Planning for Real Estate Taxation. His work has been cited in opinions and publications issued by courts and state judicial bodies. He serves as an expert witness or consultant on major litigation matters that relate to real estate and flow-through taxation.

Janice H. Eiseman, Principal
Cummings & Lockwood, Stamford, Conn.

Ms. Eiseman focuses her practice on the taxation of closely held businesses and tax planning for owners and investors. She has broad-based experience counseling clients on the formation, ownership and structuring of various business entities, as well as drafting and negotiating tax-based and transactional documentation for both individual and business clients. She has also done controversy work before the Internal Revenue Service and the New York State Department of Taxation and Finance.


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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

Janice Eiseman

Principal

Cummings & Lockwood

Lynn Fowler

Partner

Kilpatrick Townsend & Stockton

Edward Froelich

Of Counsel

Morrison & Foerster

Daniel L. Gottfried

Partner

Hinckley Allen

J. Leigh Griffith

Partner and Practice Group Leader - Tax

Waller Lansden Dortch & Davis

L. Andrew Immerman

Partner

Alston & Bird

Mark S. Lange

Partner

BakerHostetler

Joseph C. Mandarino

Partner

Smith Gambrell & Russell

Lori Mathison

Partner, Cross-Border Transactions Tax

Fraser Milner Casgrain

Christian M. McBurney

Partner

Arent Fox

Suzanne Ross McDowell

Partner, Tax-Exempt Organizations

Steptoe & Johnson

Todd Reinstein

Partner, Corporate Tax and Due Diligence

Pepper Hamilton

Alex Sadler

Partner

Morgan Lewis

Susan Seabrook

Shareholder

Buchanan Ingersoll & Rooney

Peter Stathopoulos

Managing Director, State and Local Tax Practice

Bennett Thrasher

Eric Tresh

Partner & Co-Chair, State & Local Tax Practice

Sutherland Asbill & Brennan

Amanda Wilson

Shareholder

Lowndes Drosdick Doster Kantor & Reed

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