Section 743(b) Adjustments in Multi-Tier Partnerships: Applying Rev. Rul. 87-115 to Upper- and Lower-Tier Entities

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


Conducted on Tuesday, June 20, 2017
Recorded event now available


This webinar will provide tax advisers and compliance professionals with an advanced and practical guide to the reporting complexities and planning opportunities present in making Section 743(b) adjustments in the context of mutli-tiered partnerships. The panel will outline the provisions of Rev. Rul. 87-115 governing when an upper-tier partnership may push 743(b) adjustments down to lower-tier partnership's assets, discuss planning opportunities under various scenarios, and detail the Section 755 adjustments required when making 743(b) adjustments in lower-tier partnerships.

Description

From both planning and compliance aspects, a partnership's distribution of a partnership interest under Sect. 743(b) can be one of the most challenging issues facing partnership tax advisers. Calculations that are complex when applied to single-layer partnerships become even more complicated when applied to a multi-tier partnership structure. Advisers serving multi-tier partnership clients must know not only the 743(b) rules, but also how to apply those rules in the context of a tiered-partnership structure.

Treasury has issued rulings on when basis adjustments under 743(b) are mandatory, optional or impermissible without additional action. Rev. Rul. 87-115 details adjustments that must be made in the context of the sale of an interest in an upper-tier partnership (UTP), depending on which partnership tier has an active Section 754 election in place.

Prior to any sale transaction, the partnership's tax advisers should have a thorough understanding of when each tier of the partnership may make a basis adjustment, as well as the steps to take if a 743(b) adjustment is appropriate but unavailable. Advisers must be able to determine whether 743(b) adjustment is advantageous to each partnership tier.

Listen as our panel of veteran advisers provides practical guidance in the form of a detailed case study on the ins-and-outs of the Section 743(b) adjustments and allocations, leaving you prepared to advise on the planning and compliance tasks of this complex area of partnership taxation.

Outline

  1. Section 754 election and interaction between Sections 754-755
  2. Transactions giving rise to adjustments under Sect. 743(b)
  3. Mandatory 743(b) basis adjustment rules for multi-tier structures under Rev. Rul. 87-115
    1. When both UTP and all LTPs have valid Section 754 election in place
    2. When only the UTP has made a valid Section 754 election
    3. When only the LTP has made a valid Section 754 election
  4. Coordinating tax reporting between UTP and LTPs
  5. Segregating individual transactions subject to Section 743(b) allocations
  6. Planning opportunities under various scenarios

Benefits

The panel will review these and other key issues:

  • Mechanics of applying mandatory 743(b) basis adjustments when all partnership tiers have Section 754 elections in place
  • Allocation of basis adjustments to upper- and lower-tier partnerships
  • Reporting requirements and challenges in preparing the Form 1065 return for the upper-tier partnership
  • Planning opportunities under various scenarios addressed in Rev. Rul. 87-115

Learning Objectives

After completing this course, you will be able to

  • Determine the proper Section 743(b) basis adjustments under Rev. Rul. 87-115 for multi-tier partnerships
  • Identify necessary allocations of basis adjustments to both UTP and LTPs
  • Recognize challenges in coordinating tax filings of multi-tier partnerships in which 743(b) adjustments are made upon sale of interest
  • Discern the planning opportunities for basis adjustment in multi-tier partnerships when a partnership interest is sold

Faculty

Jeffrey N. Bilsky, Partner, National Tax Office
BDO USA, Atlanta

Mr. Bilsky has more than 20 years’ experience providing tax services to private equity investment funds, capital management investors, complex operating partnership and corporate ventures, REITs, and commercial real estate companies. He has expertise in structuring partnership fund groups and modeling complex partnership calculations such as Section 752 liability allocations, Section 704(c) allocations, and maintenance of Section 704(b) capital accounts.

David Patch, Senior Director, National Tax Office Partnership Group
BDO USA, McLean, Va.

Mr. Patch works with clients on a broad range of federal income tax matters and is responsible for the development and delivery of firm training on partnership taxation. Before coming to BDO, he worked in the National Tax Practice Pass-Throughs Group at KPMG.

Thomas A. Orr, CPA, Tax Manager
BDO USA, Anchorage, Alaska

Mr. Orr is a Tax Manager with the Anchorage, AK office of BDO USA, LLP. He has over seven years of experience in public accounting with both regional and national firms. His experience runs the gamut from C corporations to pass-through entities and individuals. Mr. Orr is also a presenter at BDO’s national training conferences.


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