Section 704, Targeted Allocations and the Distribution Waterfall: Overcoming Challenges Absent IRS Guidance

Understanding the Economic Effect Test and How to Allocate Income or Loss Using Targeted Allocations

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


Conducted on Thursday, June 29, 2017

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax professionals with a review of the key concepts of targeted allocations and the role they play in making valid allocations to partners by partnerships and certain LLCs under Sect. 704(b).

Description

Targeted allocations are not a new concept but are utilized with greater frequency than traditional allocations. The targeted allocations approach may achieve the same outcome as the traditional approach, but it arrives at the allocations differently.

Using targeted allocations, a partnership liquidates in accordance with a negotiated distribution waterfall that reflects exactly the partners’ economic deal. Traditionally, the allocation provisions of partnership agreements relied on IRC 704(b) safe-harbor economic effect regs and provided that income or loss would first be allocated to the partners’ capital accounts. After such allocations, cash or other property would be distributed in proportion to partner capital accounts.

Accounting professionals must understand the potential ramifications of using targeted allocations within the requirements of the Section 704(b) economic effect test, and associated rules that rely on an allocation that has economic effect when making other allocations that cannot have economic effect by their nature (e.g., nonrecourse deductions).

Listen as our panel of tax practitioners who are experienced with targeted allocations and Sect. 704(b) gives you a thorough briefing on this complex area and helps you anticipate partner allocation issues.

READ MORE

Outline

  1. Review of partnership allocation rules
  2. Targeted capital accounts vs. liquidating with capital accounts
    1. Layer cake and targeted allocations
  3. Other considerations
    1. Regulatory allocations
    2. Preferred returns
    3. Other

Benefits

The panel will analyze and tackle these and other relevant topics:

  • “Economic effect” test safe harbor agreements vs. cash-driven agreements
  • Allocating income under either type of agreement
  • Relevant regulatory safe harbors

Faculty

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

Wilson, Amanda
Amanda Wilson

Partner
Lowndes Drosdick Doster Kantor & Reed

Ms. Wilson concentrates her practice on federal tax planning and structuring and represents clients in a wide variety...  |  Read More

Other Formats
— Anytime, Anywhere

Download

$147