Section 704(c): Contributions of Appreciated or Depreciated Property to Partnerships and LLCs

Navigating Complex Allocation Rules, Curative and Remedial Allocations, Elections, and Anti-Abuse Rules

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


Conducted on Thursday, May 25, 2017

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE/CPE webinar will provide tax advisers with a thorough and practical guide to navigating the complex requirements of Section 704(c). The panel will go in depth to identify contributed property subject to Section 704(c), and will discuss available elections to allocate gain and loss.

Description

Whenever a partner contributes appreciated or depreciated property to an entity treated as a partnership for U.S. federal tax purposes, Section 704(c) applies. Section 704(c) operates to prevent the shifting of tax liabilities associated with built-in gains and losses among/between partners when a partner contributes property that has a fair market value different from the basis the partnership takes in the contributed property.

These rules are flexible by design but raise a host of complicated decisions for tax advisers. Advisers must consider Section 704(c) tax consequences when reviewing partnership agreements and preparing partnership returns to ensure that gain and loss are properly allocated.

Section 704(c) provides elective methods for allocations to address inequities in allocating gain or loss from appreciated or depreciated property. However, these elections are limited by anti-abuse rules found in the Section 704(c) regulations. Tax advisers must know the available elections and limitations to avoid costly tax consequences.

Listen as our panel of experienced tax practitioners provides a thorough and practical guide to the rules of Section 704(c) governing partners’ contributions of appreciated or depreciated property.

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Outline

  1. Key aspects of Section 704(c)
    1. Sharing of income, gain, loss or deduction for property contributed must take account of variations between basis and fair market value at contribution
    2. Broad authority given to Treasury and IRS to determine how allocations should be made
    3. Navigating complex questions about built-in gain or loss property contributed to partnership
    4. Book v. Tax Basis
    5. The “Ceiling Rule”
  2. Traditional, curative and remedial allocation methods
  3. Revaluations
  4. Mixing bowl rules
  5. Anti-abuse rules

Benefits

The panel will review these and other key issues:

  • Reviewing partnership agreements and other operating documents based on Section 704(c) considerations
  • Making choices among the allocation method elections
  • Whether and when revaluations are appropriate or required

Faculty

O'Leary, Jennifer A.
Jennifer A. O'Leary

Partner
Pepper Hamilton

Ms. O'Leary is a partner in her firm's Tax Practice Group. She focuses her practice on the federal income...  |  Read More

Schockett, Paul
Paul Schockett

Counsel
Skadden Arps Slate Meagher & Flom

Mr. Schockett advises public and private companies on a broad range of U.S. federal income tax matters, with...  |  Read More

Donnelly, Matthew
Matthew J. Donnelly, Esq.

Skadden Arps Slate Meagher & Flom

Mr. Donnelly advises public and private companies on a broad range of domestic and international U.S. federal income...  |  Read More

Anna Blair, Esq.
Anna Blair, Esq.

Wick Phillips Gould & Martin

Ms. Blair advises clients on federal income tax and Texas state tax planning applicable to partnerships, limited...  |  Read More

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