Mastering Partnership Minimum Gain Chargeback Provisions for the Tax Professional

Reporting Requirements, Allocations and Planning Opportunities for Non-Recourse Deduction Chargebacks

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


Conducted on Thursday, July 6, 2017
Recorded event now available


This webinar will give tax advisers and professionals a deep and practical guide to understanding the planning opportunities and compliance requirements that arise from “minimum gain chargeback” provisions in partnership agreements. The panel will go into detail on what the chargeback provisions mean, and will provide detailed instruction with examples on the book and tax adjustments and allocations required to account for chargeback provisions.

Description

Minimum gain chargeback provisions are found in nearly every partnership and limited liability company (LLC) operating agreement. Yet, few practitioners fully understand what minimum gain chargebacks require—including many attorneys who draft partnership agreements. Simply stated, a minimum gain chargeback provision is required by law to be included in partnership and LLC agreements to allocate non-recourse deductions in any manner other than on a strict pro-rata basis.

The minimum gain provisions require that partners who have previously received the benefit of non-recourse deductions must have those deductions “charged back,” when the asset subject to the non-recourse debt is disposed of, or if the non-recourse debt has a change in character. Yet, there are several notable exceptions to these requirements, and tax practitioners need to know when chargeback provisions apply and when they don’t.

Partnerships may also anticipate a chargeback and take steps to avoid the negative tax consequences of a chargeback. Partners may contribute capital to cover their portion of the non-recourse debt, or the partnership may request a waiver of the requirement if the chargeback would lead to unintended economic distortions. By understanding the chargeback provisions, tax advisers can avoid negative tax consequences for clients through proper planning.

Listen as our experienced panel provides an in-depth, practical guide to the planning and reporting components of minimum gain chargeback provisions, using concrete examples to illustrate how to handle various real life scenarios.

Outline

  1. Definition of minimum gain and Treas. Reg. 1.704-2(d) provisions
  2. Chargeback allocations
  3. Ordering rules
  4. Exceptions to chargeback rules
  5. Special circumstances
  6. Case study involving calculations

Benefits

The panel will discuss these and other critical questions:

  • What should a minimum gain chargeback provision look like?
  • How does a minimum gain chargeback provision operate to allocate previously-claimed non-recourse deductions?
  • How do minimum gain chargebacks get reported on tax returns?
  • What are common mistakes in reporting chargebacks and how can they be avoided?
  • How does an adviser recognize planning opportunities in avoiding chargebacks?

Learning Objectives

Upon completing this webinar, you will be able to:

  • Determine minimum gain chargebacks.
  • Identify exceptions to the minimum gain chargeback rules.
  • Ascertain whether a debt or liability is recourse or nonrecourse.

  • Recognize the tax consequences of a nonrecourse debt being converted into a recourse debt and vice versa.

  • Distinguish the treatment of debt and liability under IRC 1001 and IRC 752.

  • Decide how to allocate chargebacks.

Faculty

Maher Haddad, Partner
Baker & McKenzie, Chicago

Mr. Haddad concentrates his practice on advising US and non-US clients on federal income tax issues. He provides tax structuring advice to corporations, partnerships, limited liability companies, and other pass-through entities. He is also experienced in tax matters related to joint ventures, private equity fund investments, and real estate transactions, including fund and REIT structures.

Paul D. Patrow, Partner
Faegre Baker Daniels, Chicago

Mr. Patrow advises corporations on tax strategies during business formation and transactions. He is experienced in acquisitions, dispositions, financings, private equity transactions, and domestic and international joint ventures. He also represents private equity and hedge fund sponsors in connection with the formation and operation of investment funds and the acquisition and disposition of investments. Additionally, he advises venture capital investors on the tax implications of their investments in operating companies. He also assists with tax planning for domestic and international real estate investment transactions and with the tax aspects of bankruptcy and private workouts.


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Recordings

CPE On-Demand

Includes video streaming of full program plus handouts (available within a week of the live webinar).

Strafford is a NASBA-approved CPE provider for On-Demand webinars.

This program is eligible for 2.0 CPE credits.

  • Field of Study: Taxes.
  • Level of Knowledge: Intermediate.
  • Advance Preparation: Printing and reviewing Program Outlines and materials.
  • Teaching Method: Seminar/Lecture.
  • Delivery Method: QAS Self-Study.
  • Prerequisite: 

    Three years+ business or tax experience at mid-level within the organization, preparing complex partnership tax returns. Specific knowledge of minimum gain, recourse and nonrecourse debts and liabilities and the allocation of these debts and liabilities, the impact of partners’ contributions to partnerships on nonrecourse debts and obligations; familiarity with minimum gain chargeback provisions, exceptions to the chargeback rules, and opportunities to avoid chargebacks.

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Includes full event recording plus handouts.

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Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).

Program Materials

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Program Materials

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