Mastering Partnership Minimum Gain Chargeback Provisions for the Tax Professional

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

Note: CLE credit is not offered on this program

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


Conducted on Thursday, July 11, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will give tax advisers and professionals an in-depth and practical guide to understanding the planning opportunities and compliance requirements that arise from "minimum gain chargeback" provisions in partnership agreements. The panelist will go into detail on the impact of chargeback provisions and 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 agreement and limited liability company (LLC) operating agreement. 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, or if the non-recourse debt has a change in character. 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 panelist 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.

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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. A case study involving calculations

Benefits

The panelist will discuss these and other critical questions:

  • How should a minimum gain chargeback provision look?
  • 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?

Faculty

Borden, Bradley
Professor Bradley T. Borden

Professor of Law
Brooklyn Law School

Professor Borden’s research, scholarship, and teaching focus on taxation of real property transactions and...  |  Read More

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