Recourse and Non-Recourse Debt for Partnerships

Minimizing the Tax Impact of Partner Liability and Debt Allocations Under Sections 752 and 704

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

Conducted on Wednesday, December 3, 2014

Recorded event now available

or call 1-800-926-7926
Course Materials

This course will prepare accounting advisors and tax preparers to make the difficult and complex distinction between recourse and non-recourse debts for partnerships. The panel will explain how to account for those debts in a partner’s tax basis under IRC §§752 and 704.

Description

Advisors to partnerships and multi-entity companies must thoroughly grasp Section 752 rules governing debt held by partnerships. Advisors need to master the tax implications of characterizing liabilities as recourse or non-recourse on a partner’s tax basis to determine when loss or gain from debt is recognized. Advisors must also be aware of the IRS’s proposed changes to the classification of liabilities under Section 752.

The challenges of applying debt allocation rules—and the distinction between inside and outside basis—under Section 752 are heightened by the interplay with Section 704(b) partnership allocations of income and losses. Adding minimum gain chargeback provisions to partnership agreements gives partners an advantage.

Advisors need a thorough understanding of the three allocation tiers for non-recourse liabilities to properly understand the applicable allocation method and the resulting economic impact of such liabilities on the partners.

Listen as our panel of experienced advisors provides a solid background on the treatment of recourse and non-recourse liabilities under Sections 752 and 704. The panel will also drill into complex scenarios involving partnership liabilities and basis implications.

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Outline

  1. Overview of §754 terms on liabilities, §704(b) terms on allocations
    1. Allocation of taxable income
    2. Definitions of recourse, non-recourse liabilities
    3. Allocations attributable to each type of liability
  2. Distinguishing recourse and non-recourse liabilities
    1. Interplay between §§754 and 704(b)
  3. Special tax issues
    1. COD income vs. Tufts gain
    2. Abandonment of interest
    3. Other tax issues

Benefits

Our panel will review these and other key issues:

  • How the distinctions between recourse and non-recourse liabilities affect partnership allocations.
  • How Section 752 rules on sharing partnership liabilities can interact with Section 704(b) rules on partnership allocations.
  • How non-recourse debt can be addressed when it has a negative tax impact.
  • When a minimum gain charge-back should be considered.

Faculty

Jonathan Stein
Jonathan Stein
Atty.
Pryor Cashman

Mr. Stein advises on corporate, partnership, and international tax issues. He has represented buyers and sellers in...  |  Read More

Edward S. Wei
Edward S. Wei
Atty.
Cadwalader Wickersham & Taft

Mr. Wei's a transactional lawyer with significant expertise in the tax aspects of domestic and cross-border...  |  Read More

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