IRC Section 734 Adjustments: Distributions of Partnership Property

An Advanced Case Study of Calculations and Considerations

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


Conducted on Wednesday, September 16, 2020

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will equip tax professionals with the tools to analyze the impact of a Section 754 election (or lack thereof). The panel will offer a detailed case study and illustration of how to calculate Section 734(b) basis adjustment(s) to assets retained by the partnership after distribution to a partner.

Description

Understanding the Section 754 election and its related basis adjustments is a critical skill for tax professionals serving as advisers to clients owning or managing partnerships. The election allows changes to "inside basis," the bases of assets the partnership owns. Even in the absence of the election, there are mandatory adjustments to inside basis.

Section 734(b) adjustments can have a significant impact when a partnership has a 754 election in effect and makes a distribution to a partner or when a partner has a substantial basis reduction in connection with distribution at a time when the partnership does not have a Section 754 election in effect. The 2017 Tax Act and other recent changes including the 163(j) interest limitation, the 199A QBI deduction, and 168(k) bonus depreciation affect these calculations. Section 734(b) adjustments can have different implications for different partners as well, so tax advisers need to fully grasp the tax consequences of Section 734(b) adjustments.

Tax advisers must not only understand the rules but also grasp the practical calculations, allocations, and reporting mechanics of Section 734(b) adjustments. Failure to understand the "moving pieces" of the basis adjustments under Section 734 can result in unnecessary tax issues for the individual partners--some of whom might be your clients.

Listen as our panel of veteran advisers provides practical guidance in the form of a detailed case study on the ins-and-outs of the calculation and allocation of Section 734(b) adjustments, leaving you prepared to advise on the planning and compliance tasks of this complex area of partnership taxation.

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Outline

  1. The mechanics of a Section 754 election
  2. 2017 Tax Act considerations: 163(j), 168(k) and 199A
  3. Basis adjustments under Section 734(b)
  4. Negative adjustment
  5. Positive adjustment
  6. Allocation of adjustment under IRC 755
  7. Case study and illustration
  8. Special rules
  9. Planning considerations

Benefits

The panel will review these and other principal issues:

  • Making a Section 754 election at the partnership level and understanding "inside basis" vs. "outside basis"
  • Understanding the basis adjustment under Section 734(b)
  • Calculating Section 734(b) adjustment on retained partnership assets
  • Allocating Section 734(b) adjustment to a partnership’s remaining assets
  • Reporting Section 734(b)adjustment
  • Planning considerations and consequences of Section 734(b) adjustments

Faculty

Barnett, Robert
Robert S. Barnett, CPA

Partner
Capell Barnett Matalon & Schoenfeld

Mr. Barnett’s practice is highly concentrated in the areas of taxation, trusts, estates, corporate and...  |  Read More

Wiesen, Dina
Dina A. Wiesen

Managing Director, National Tax Office, Passthroughs
Deloitte

Ms. Wiesen specializes in partnership taxation, specifically the use of partnerships and limited liability companies in...  |  Read More

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