Partnership Basis and Distributions: Navigating Sections 731-737, 751(b) and 755

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


Conducted on Tuesday, September 9, 2014

Recorded event now available

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Program Materials

This webinar will provide tax advisors and managers with an in-depth review of the rules for partnership basis adjustments and distributions under Internal Revenue Code Sections 731 through 737, 751(b) and 755.

Description

Generally, Internal Revenue Code rules aim for partnership distributions to be treated as non-taxable events. However, exceptions to those rules can quickly turn distributions taxable. That is where tax advisors and managers feel the pain of the terms of Sections 731 through 737, 751(b) and 755.

Sect. 751(b) can be deceptively complicated, as examples in the regs can prove oversimplified relative to real-life scenarios. However, understanding it is vital because it provides the foundation to tax transfers of partnership interests. Sect. 737 also poses various tax challenges for tax pros.

Sect. 731 is key to understanding whether a disguised sale overrides partnership distribution rules to make the optimal decision on the tax status of a distribution. Tax advisors working with partnership basis and distributions must be able to navigate all of these Code Sections.

Listen as our panel of experienced advisors explains the material terms of Sections 731 through 737, 751(b) and 755 and explores common taxpayer scenarios involving partnership distributions and basis adjustments.

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Outline

  1. Three basic types of distributions resulting from a partnership
    1. Non-liquidating distributions of cash and other property
    2. Liquidating distributions of cash and other property that eliminate a partner's interest
    3. Disproportionate distributions that affect partner's share of ordinary income
  2. Sect. 731 on gain or loss recognition
  3. Sect. 732 on partner's basis of property received
    1. Money
    2. Other property
  4. Sect. 733 on partner's remaining basis
  5. Sect. 734 on adjustment to basis
  6. Sect. 751(b)
    1. Purpose
      1. Disproportionate distribution occurrences
        1. Hot assets include unrealized receivables and substantially appreciated inventory
        2. Other property, including cash
    2. Circumstances under which Sect. 751 does and does not apply
  7. Sect. 755
  8. Best practices for partnership distributions
  9. Special problems
    1. Mixing bowl transactions
    2. Enactment of Sect. 737
      1. Two special adjustment rules

Benefits

The panel will explore topics such as:

  • Determining when basis of property received exceeds the partnership interest's outside basis.
  • Pinpointing the circumstances under which utilizing Sect. 732 makes the most sense.
  • Identifying and handling potential pitfalls in Sect. 751(b).
  • Understanding practical issues with special basis adjustments under Sect. 755 caused by installment sales and modified depreciation on stepped-up assets.

Faculty

Immerman, Andrew
L. Andrew Immerman

Partner
Alston & Bird

Mr. Immerman concentrates on federal income tax matters, including domestic and international tax planning and...  |  Read More

Fowler, Lynn
Lynn E. Fowler

Partner
Kilpatrick Townsend & Stockton

Mr. Fowler's practice specializes in tax-efficient strategies for a variety of business entity formation,...  |  Read More

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