New Section 514(c) Fractions Rule Guidance for Exempt Orgs: Avoiding UBTI in Real Estate Partnership Investments

A live 110-minute CPE webinar with interactive Q&A


Tuesday, October 3, 2017 (in 12 days)
1:00pm-2:50pm EDT, 10:00am-11:50am PDT


This webinar will provide advisers to tax-exempt organizations with a practical guide to the fractions rule, which governs the tax implications of allocations between tax-exempt partners and taxable partners. The panel will detail recent IRS guidance permitting certain partnership allocations that may have otherwise violated the fractions rule. The webinar will define the specific issues and challenges the fractions rule presents for exempt organizations in designing an investment strategy.

Description

The partnership “fractions rule” of Section 514(c)(9)(E) has a well-deserved reputation among tax advisers and counsel as an intimidating tax trap for exempt organizations investing in real estate partnerships. The rule represents the intersection of UBTI and partnership allocations and creates a significant challenge to partnerships in designing appropriate allocations. This often discourages exempt organizations from investing directly in real estate partnerships, particularly those with debt financing.

The rule generally provides that partnerships with “qualified organizations” as partners may not allocate a percentage share of partnership income to a qualified organization in any year that is higher than their share of overall partnership loss in any tax year where such share of the loss is the smallest. All partnership allocations must also have “substantial economic effect” within the meaning of Section 704(b)(2). However, the multiple exceptions in the Section 514(c)(9) rules and regulations make applying the rules particularly complex.

The IRS recently issued proposed regulations to simplify the tax burden on exempt organizations investing in real estate partnerships. Under the proposed regulations, partnerships would be allowed to make allocations consistent with common business practices, although some questions still remain. The changes are generally taxpayer-friendly and may (if finalized) provide opportunities for reduced tax liabilities for exempt organizations that invest in fractions-rule compliant partnerships. Tax advisers must understand the application of the regulations to avoid costly tax consequences.

Listen as our experienced panel of exempt organization advisers provides a thorough and practical guide to navigating the complexities of the fractions rule in light of the proposed regulations.

Outline

  1. UBTI rules of Section 512 in partnership context
  2. Section 514(c)(9)(E) fractions rule defined
  3. Analysis and tests to determine if fractions rule applies
  4. REG-136978-12 proposed changes to fractions rule treatment
  5. Issues and practices in fractions rule compliant partnership agreements

Benefits

The panel will discuss these and other important issues:

  • Qualified organizations and transactions that give rise to the “fractions rule”
  • Previously prohibited allocations which may be permissible under the proposed regulations
  • Curative allocations in a fractions-rule compliant partnership agreement—and when to use them

 

Learning Objectives

After completing this course, you will be able to:

  • “Qualified organizations” and transactions that give rise to the “fractions rule”
  • Previously prohibited allocations which may be permissible under the proposed regulations
  • Curative allocations in a fractions-rule compliant partnership agreement—and when to use them

Faculty

Stephen Butler, Partner
Kirkland & Ellis, New York

Mr. Butler's practice focuses on the tax aspects of complex business transactions and reorganizations, with a particular concentration on private equity and real estate fund formation, infrastructure and renewable energy investments, real estate joint ventures, mergers and acquisitions, and bankruptcy restructurings. He is a published author and frequent speaker on tax issues.

John R. Luksis, Senior Manager
RSM US, Chicago

Mr. Luksis is a tax advisor with the Firms's national real estate practice. He provides comprehensive tax services to real estate funds, REITs and their affiliates. He has significant experience in federal and state tax consulting, structuring and compliance for a wide range of real estate clients and regularly consults on matters including transaction support, REIT suitability analysis, state and foreign withholding considerations and tax-exempt investor (UBTI) issues including fractions rule structuring and compliance. He is a member of the firm’s national pass-through entity group.

Demetre Klebaner
Kirkland & Ellis, Chicago

Mr. Klebaner focuses of his practice on an array of tax areas, including the tax aspects of commercial real estate and bankruptcy restructuring. He co-authored a publication regarding the fractions rule and real estate joint ventures for Thomson Reuters Real Estate Taxation.


Registration per Person for Live Event

Additional lines for this conference can be purchased at 25% off. For orders of five or more lines, further discounts will apply and will be automatically reflected in the cart.

Live Webinar $147.00

Live Webinar & CPE Processing $182.00


CPE per Person on Live Event

Continuing Professional Education credit processing is available for an additional fee. CPE processing must be ordered prior to the event. To qualify for CPE you may not listen via the telephone.

This program is eligible for 2.0 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+ nonprofit business or firm experience at mid-level within the organization, completing complex forms and schedules and supervising other attorneys.Specific knowledge and understanding of partnership structure, operating agreements and liquidation, including partner capital accounts, allocation and distributions; familiarity with the unrelated business taxable income regulations of IRC section 512.

NOTE: CPE credit processing for all attendees must be ordered by 2pm Eastern the day of the program to receive a Certificate of Attendance within 24 hours.


Recordings

Recorded Event

Includes full event recording plus handouts (available after live webinar).

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Recorded Webinar Download $147.00
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Recorded Audio Download (MP3) $147.00
Available 24 hours after the live event

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DVD (Slide Presentation with Audio) $147.00 plus $9.45 S&H
Available ten business days after the live event

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Live Webinar & Webinar Download $194.00

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Live Webinar & Audio Download $194.00

Recorded Audio Download (MP3) Only $47.00 with Registration/MP3 Combo

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DVD (Slide Presentation with Audio) Only $47.00 with Registration/DVD Combo


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Customer Reviews

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Bill Allen

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