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Short Year 1065 Returns for Terminated Partnerships: Avoiding Penalties For Failure to Report

IRC 708(b) Filing Requirements and Reporting Prior and Successor 754 Elections

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

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Conducted on Wednesday, November 8, 2017

Recorded event now available

This course will provide tax advisers with a practical guide to completing “short year” Form 1065 Partnership Income Tax returns. The panel will discuss the rules governing short-year filings and will focus on technical terminations of existing partnerships that continue business activities as legal ongoing entities.

Description

The Section 708(b) “technical termination” is a peculiarity of partnership tax law that leads to unexpected tax penalties. The sale of greater than 50% of the partnership’s assets or profits within a 12-month period, among other circumstances, can terminate the partnership for tax purposes though the entity is actively conducting business.

When a technical termination occurs, the partnership is deemed to have closed its tax books. The Code considers the partnership’s assets to be contributed on a tax-free basis to a successor partnership or LLC and deems ownership interests in the successor partnership distributed to the remaining members of the terminated partnership.

A partnership subject to a technical termination must file two “short-year” Form 1065 income tax returns: One for the period up to the termination event and a second for the successor partnership after the termination. Failure to comply leads to penalties for failure to timely file the initial short-year return and for issuing inaccurate K-1s to the partners.

Tax advisers must know when a technical termination occurs, make sure capital accounts are accurately carried over to the successor partnership, and review the status of existing elections to accurately file the short-year returns.

Listen as our experienced panel provides a practical guide to preparing “short-year” partnership income tax returns for terminated partnerships.

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Outline

  1. Identifying technical terminations under Section 708(b)
  2. Recording deemed transfer of assets and partnership interests
  3. Applying elections from terminated partnership to successor partnership
  4. Completing short-form 1065 returns
  5. Penalties for noncompliance

Benefits

The panel will discuss these and other important issues:

  • What constitutes a “sale or exchange of greater than 50% interest in capital or profits” within a 12-month period that causes a technical termination?
  • How do multiple sales or dispositions impact the Section 708(b) analysis?
  • How must advisers handle and report prior 754 elections made by the partnership?
  • What opportunities for new elections are presented in technical termination/short-year scenarios?

Faculty

Lovett, Brian
Brian T. Lovett, CPA, JD
Partner
Withum Smith+Brown

Mr. Lovett has extensive experience serving the tax needs of both public companies and closely-held businesses,...  |  Read More

Bartolf, Scott
Scott Bartolf, CPA
Senior Tax Manager
Withum Smith+Brown

Mr. Bartolf specializes in individual, partnership, corporate, estate & trust taxation and, state tax audits. He...  |  Read More