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

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.