IRC Sect. 707: Transactions Between Partner and Partnership

Navigating Disguised Sales Provisions and Avoiding Other Pitfalls Under Anti-Abuse Rules

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

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Conducted on Wednesday, June 8, 2011

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Course Materials

This teleconference will provide tax advisors with a review of the key tax ramifications involved with transactions between partners and partnerships under Sect. 707 of the Internal Revenue Code.


Section 707 raises some of the most vexing issues that advisors will face anywhere in the Internal Revenue Code. Its role is to prevent tax-abusive transactions involving property transfers, sales or exchanges; performance of services; and guaranteed payments between a partner and the partnership.

However, the relationship between a partner and partnership can be ambiguous, and lines can blur between acting in a partner's role and as an unrelated party. What sorts of transactions will run afoul of disguised sale rules under Sect. 704(a)(2)(B), triggering a federal tax bill?

Advisors must stay abreast of evolving material terms, nuances and implications of Sect. 707 and agency guidance and court rulings, such as Canal Corp., which declared a leveraged partnership transaction a taxable asset sale and the taxpayer responsible for an accuracy related penalty.

Listen as our panel of experienced tax practitioners gives you a thorough briefing on the current Sect. 707 regs, guidance and IRS audit policy.



  1. Important provisions of Sect. 707
    1. Sect. 707(a)(2)(A) on partner performance of services
    2. Sect. 707(a)(2)(B) on partner transfers of property
    3. Sect. 707(b)(1) on disallowance of losses
    4. Sect. 707(b)(2) on treatment of gains as ordinary income
    5. Sect. 707(b)(3) on ownership of a capital or profits interest
    6. Sect. 707(b)(3)(c) on guaranteed payments
  2. Administrative guidance and decisions involving Sect. 707
    1. Relevant IRS private letter rulings and written determinations
    2. Canal Corp. v. Commissioner, U.S. Tax Court
      1. Leveraged partnership transaction triggered anti-abuse rules
  3. Current IRS audit policy
    1. Partner-partnership structures currently under audit
    2. Lessons for other taxpayers and advisors
  4. Transactions that seem problematic, permissible going forward from a tax standpoint


The panel will analyze and tackle these and other relevant topics:

  • Critically important terms of Sect. 707, related administrative guidance and court rulings.
  • Transactions that are most likely to run afoul of the disguised sale and anti-abuse rules, and those likely to avoid a taxability declaration.
  • The kinds of structures currently attracting attention in IRS audits, and the implications for other taxpayers and advisors.

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.


Immerman, Andrew
L. Andrew Immerman

Alston & Bird

Mr. Immerman concentrates on federal income tax matters, including domestic and international tax planning and...  |  Read More

Keith A. Wood
Keith A. Wood

Carruthers & Roth

He works with business clients on a wide range of tax and succession planning, compensation and management structure...  |  Read More

Patricia McDonald
Patricia McDonald

Baker & McKenzie

She works on tax issues for corporations and partnerships, LLCs and other pass-through entities. She speaks frequently...  |  Read More

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