Section 754 and Basis Adjustments for Partnership and LLC Interests

Navigating Complexities in Federal Tax Treatment of Distributions and Sales of Interests

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

Conducted on Tuesday, September 13, 2011
Recorded event now available

This teleconference will provide advisors with a thorough review of both the material terms and practical considerations involved with Sect. 754 elections and basis adjustments for sales or distributions of partnership interests or property.


Sect. 754 is a critical part of the Code for advisors working on partnership tax matters. It governs an election for treating basis in the event that an interest in a partnership or an LLC taxed as a partnership is sold at fair market value. Implications for depreciation deductions are important.

How should the "step up" adjustments to basis in the partnership's assets be calculated and recorded? How do the rules for a Sect. 734 distribution of property and a Sect. 743 distribution of property interest differ? How should a "step down" in basis and negative depreciation be recorded?

Tax advisors must understand the rules and the practical hows and whys to make a Sect. 754 election. Further, you must reach the bottom line on basis and depreciation issues, make complicated adjustment calculations, and make the right choices for reporting on depreciation schedules.

Listen as our panel of experienced advisors gives you a drill-down briefing on Sect. 754 and related administrative guidance, and translates it into the practical challenges that confront practitioners working on complex partnership tax issues.


  1. Fundamental issues underlying Sect. 754 and related administrative guidance
    1. Partnerships choose how basis will be adjusted in event of a distribution or sale
    2. Sect. 734 distributions of property
    3. Sect. 743 distributions of partnership interests
    4. Potential step-up adjustments to basis
      1. Allocating the step-up
    5. Potential step-down adjustments to basis
  2. Sect. 754 election process
    1. Procedures
    2. Evaluating future implications of a Sect. 754 election
  3. Common computation challenges with basis adjustments
  4. Common reporting issues with basis adjustments


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

  • Sect. 754 election rules: How to make a proper election, and the practical pros and cons of doing so.
  • Effects of Sect. 754 elections: Effects on depreciation when partnership interests or property is distributed or sold.
  • Basis adjustments: Avoiding common mistakes in calculations and reporting.
  • Step-ups and step-downs: Understanding the rules for each situation.

Upon completing this seminar, you will have a better understanding of the complex tax and depreciation issues for partnerships and partners involved with sales of interests and property governed by Sect. 754. You will have a better grasp of the range of issues to consider with Sect. 754 elections.


Janice Eiseman, Principal
Cummings & Lockwood, Stamford, Conn.

Her practice specializes in taxation of closely held businesses and tax planning for owners and investors, with a particular emphasis on structuring of various business entities. She also has handled tax controversy work before the IRS and New York State tax authorities.

Craig Taylor, Director
Carruthers & Roth, Greensboro, N.C.

His practice works with closely held businesses, particularly LLCs and especially involving real estate investment and ownership vehicles.

Craig Gerson, Principal, National Tax Services
PricewaterhouseCoopers, Washington, D.C.

He specializes in partnership taxation issues. Before joining the firm, he worked for four years as an attorney-advisor with the IRS Office of Chief Counsel (Passthroughs and Special Industries).


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Accounting Tax Services Advisory Board

Richard H. Gesseck



Neil Goldenberg

Partner-In-Charge, Internal Audit & Risk Management


Lynford Graham, CPA

Professor of Accounting

Bentley University

Joe Kristan


Roth & Co. CPAs

Curtis Reinhart


Ernst & Young

Charles (Chip) Schweiger


Whitley Penn

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