New IRC 721(c) Regulations and Contributions to Foreign Partnerships

Remedial Allocations and Structuring Transfers to Foreign Partnerships to Ensure Gain Deferral

A live 90-minute CLE/CPE webinar with interactive Q&A

Wednesday, September 6, 2017
1:00pm-2:30pm EDT, 10:00am-11:30am PDT

This CLE/CPE webinar will provide tax counsel with a detailed and practical guide to the rules governing contributions by U.S. persons to “related foreign partnerships,” particularly in the wake of new IRC 721(c) Treasury Regulations, which effectively end non-recognition treatment of partnership contributions if a US person contributes appreciated property to a partnership (US or foreign) in which the US person and related foreign persons own 80 percent or more of the partnership’s interests. The panel will review the specific changes the new regulations make to the previous rules found in Notice 2015-54, and offer guidance on allocation methods on covered contributions.


Ownership of interests in a partnership in which there are “related foreign partners” creates multiple challenges for U.S. taxpayers and their advisers. Besides complex and burdensome reporting requirements, some property transfers and contributions that would be tax-free to a partnership are a taxable event if made to a “section 721(c) partnership. If a US person transfers appreciated property to a US partnership and the partnership qualifies as a “section 721(c) partnership” as defined in the regulations, the transfer generally will not be tax-free (though the partnership may adopt the gain deferral method in which the US person would recognize the built-in gain associated with the property over time).

The IRS recently issued temporary and proposed regulations under Section 721(c) which changed the tax treatment of certain contributions of appreciated property by a US person to a partnership in which the US person and related foreign persons own 80 percent or more of the partnership’s interests. The new regulations generally follow and supersede the prior guidance of Notice 2015-54, with some clarifications.

U.S. taxpayers must recognize pre-contribution gain on certain appreciated property to a partnership with “related foreign partners” unless the partnership adopts the “gain deferral method” for the contributed property. This gain deferral method requires the partnership to use remedial allocations for all built-in gain on the contributed property.

Tax counsel must know the technical requirements of the new rules to avoid adverse tax consequences from partnership contributions. The rules do not apply to all contributions of property to all partnerships, so counsel and advisers must understand how the new regulations fit into the framework of owning foreign partnership interests.

Listen as our expert panel goes into detail on the forthcoming regulations and provides practical suggestions for leveraging the new rules to preserve nonrecognition treatment.


  1. Default deferral rules on contributions to partnerships
  2. Treas. Reg. TD 9814, Transfers of Certain Property by U.S. Persons to Partnerships with Related Foreign Partners
  3. Gain deferral method and remedial allocations
  4. Structuring contributions to partnerships
  5. Reporting requirements for property contributions to foreign partnerships


The panel will review these and other key issues:

  • What is the default deferral treatment of contributions to partnerships?
  • Determining when a property transfer to a partnership requires recognition of built-in appreciation
  • Structuring contributions to 721(c) partnerships to apply gain deferral method
  • Understanding remedial allocations applied to contributed property

Learning Objectives

After completing this course, you will be able to:

  • Identify the default treatment of contributions to partnerships
  • Recognize when a partnership qualifies as a “721(c) partnership with related foreign partners”
  • Determine when a property contribution may not qualify for Section 721(a) non-recognition treatment
  • Discern how and when to use the remedial allocation method to qualify for gain deferral on contributions of 721(c) property


Richard Blumenreich, Principal-in-Charge
KPMG, Washington, D.C.

Mr. Blumenreich is principal-in-charge of the Washington National Tax Credit and Energy Advisory Services Group. For his prior 20 years at KPMG, he was a principal in the Washington National Tax Passthoughs Group. He focuses primarily on tax issues relating to tax credits, partnerships, depreciation, amortization of intangibles, and leasing. Prior to joining KPMG, he was with the Internal Revenue Service’s Office of Chief Counsel where he was an Assistant Branch Chief in the Office of the Assistant Chief Counsel (Passthroughs & Special Industries) and an Attorney-Advisor in the Legislation and Regulations Division. While at the IRS, he worked extensively on regulations and rulings regarding the taxation of partnerships, depreciation, and tax credits.

Morgan Holtman, Director, Passthroughs Group
KPMG, Washington, D.C.

Ms. Holtman's practice focuses on cross-border partnership matters with particular emphasis on complex equity structures, special allocations, and mergers and acquisitions. Her experience includes advising clients on partnership formation, operation, and liquidation issues; coordinating with non-U.S. tax advisors on multi-jurisdictional partnership transactions; advising clients on the tax implications of partnership agreements; advising and representing clients on partnership tax matters in financial accounting audits; and providing partnership tax training for client and firm personnel.

Live Webinar

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Continuing Professional Education credit processing is available for an additional fee per person. You may register for CPE credit processing at any time before or after the program. To qualify for CPE you may not listen via the telephone.

This program is eligible for 1.5 CPE credits.

  • Field of Study: Taxes.
  • Level of Knowledge: Intermediate.
  • Advance Preparation: None.
  • Teaching Method: Seminar/Lecture.
  • Delivery Method: Group-Internet (via computer).
  • Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of verification codes announced throughout the presentation.
  • Prerequisite: Three years+ business, law or public firm experience at mid-level within the organization, overseeing and structuring U.S. taxpayers' transactions in foreign partnerships; supervisory authority over other attorneys, preparers/accountants. Knowledge and understanding of the default rules for tax treatment of partnership contributions; familiarity with foreign partnership structures

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Tax Law Advisory Board

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Capell Barnett Matalon & Schoenfeld

William H. Byrnes

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Texas A&M University Law

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Patrick Derdenger

Tax Partner

Steptoe & Johnson

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Cummings & Lockwood

Lynn Fowler


Kilpatrick Townsend & Stockton

Edward Froelich

Of Counsel

Morrison & Foerster

Daniel L. Gottfried


Hinckley Allen

J. Leigh Griffith

Partner and Practice Group Leader - Tax

Waller Lansden Dortch & Davis

L. Andrew Immerman


Alston & Bird

Mark S. Lange



Joseph C. Mandarino


Smith Gambrell & Russell

Lori Mathison

Partner, Cross-Border Transactions Tax

Fraser Milner Casgrain

Christian M. McBurney


Arent Fox

Suzanne Ross McDowell

Partner, Tax-Exempt Organizations

Steptoe & Johnson

Todd Reinstein

Partner, Corporate Tax and Due Diligence

Pepper Hamilton

Alex Sadler


Morgan Lewis

Susan Seabrook


Buchanan Ingersoll & Rooney

Peter Stathopoulos

Managing Director, State and Local Tax Practice

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Sutherland Asbill & Brennan

Amanda Wilson


Lowndes Drosdick Doster Kantor & Reed

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