Structuring Targeted Partnership Tax Allocations: Complying With IRC 704(b)

Determining Substantial Economic Effect, Distinguishing Targeted and Regulatory Allocations

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Wednesday, May 3, 2017
Recorded event now available


This CLE/CPE webinar will provide tax counsel and advisors with the guidance necessary to correctly implement targeted partnership tax allocations. The panel will explain the complex requirements of IRC § 704(b) and provide best practices for maximizing the tax benefits of targeting partnership allocations.

Description

Targeted partnership tax allocations are a popular choice for allocating income and loss among partners. Tax counsel and advisors must provide clients with guidance on whether this method will capture all of the allowable benefits.

The main concern plaguing taxpayers is compliance with IRC § 704(b) and its complicated regulations. Advisors and counsel must grasp the nuances of these complex rules when drafting targeted tax allocation provisions.

Tax advisors and counsel must also differentiate between targeted and regulatory allocations. For example, target allocation agreements may not satisfy regulatory safe harbors but can still satisfy the regulatory economic effect equivalence test or the partners’ interest in the partnership test. Not satisfying the regulatory safe harbors might impact the availability of other favorable rules.

Listen as our experienced panel guides you in approaches to determine when targeted allocation provisions are beneficial, how to comply with IRC § 704(b), including its substantial economic effect standards, and how to choose between targeted and regulatory allocations and drafting best practices.

Outline

  1. Targeted versus regulatory allocations
  2. Benefits and detriments of targeted allocations
  3. IRC § 704(b) requirements
    1. Substantial economic effect
    2. Economic effect equivalence
    3. Partners’ interests in the partnership
  4. Targeted allocation agreement drafting best practices

Benefits

The panel will review these and other key issues:

  • What are the tax benefits of targeted partnership tax allocation methods when allocating income and loss among partners?
  • What are the requirements of IRC § 704(b) and how does it apply to targeted partnership tax allocations?
  • What are best practices in drafting targeted allocation provisions?
  • What factors must be considered in choosing between targeted and regulatory allocations?

Learning Objectives

After completing this course, you will be able to:

  • Distinguish targeted versus regulatory partnership allocations
  • Determine the benefits of targeted allocations
  • Identify the risks of targeted allocations
  • Recognize IRC Section 704(b) requirements

Faculty

Lynn E. Fowler, Partner
Kilpatrick Townsend & Stockton, Atlanta

Mr. Fowler's practice specializes in tax-efficient strategies for a variety of business entity formation, financing, operations and disposition transactions. He has worked with clients frequently on federal income tax credits, and taxable and tax-free M&A transactions.

Noel P. Brock, Assistant Professor
Eastern Michigan University, Ypsilanti, Mich.

Mr. Brock is an assistant professor at Eastern Michigan University, where he teaches and researches in the area of tax law with an emphasis on transactional tax including partnership, corporate, financial products and international taxation. He is also Of Counsel for Steptoe & Johnson, where he focuses his practice in the area of transactional tax in support of energy, corporate service, banking, real estate, and financial services. He is a CPA and has published on targeted tax allocations.


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Tax Law Advisory Board

Robert S. Barnett

Partner

Capell Barnett Matalon & Schoenfeld

William H. Byrnes

Associate Dean, Special Projects

Texas A&M University Law

Robert A.N. Cudd

Senior Partner

Polsinelli

Patrick Derdenger

Tax Partner

Steptoe & Johnson

Janice Eiseman

Principal

Cummings & Lockwood

Lynn Fowler

Partner

Kilpatrick Townsend & Stockton

Edward Froelich

Of Counsel

Morrison & Foerster

Daniel L. Gottfried

Partner

Hinckley Allen

J. Leigh Griffith

Partner and Practice Group Leader - Tax

Waller Lansden Dortch & Davis

L. Andrew Immerman

Partner

Alston & Bird

Mark S. Lange

Partner

BakerHostetler

Joseph C. Mandarino

Partner

Smith Gambrell & Russell

Lori Mathison

Partner, Cross-Border Transactions Tax

Fraser Milner Casgrain

Christian M. McBurney

Partner

Arent Fox

Suzanne Ross McDowell

Partner, Tax-Exempt Organizations

Steptoe & Johnson

Todd Reinstein

Partner, Corporate Tax and Due Diligence

Pepper Hamilton

Alex Sadler

Partner

Morgan Lewis

Susan Seabrook

Shareholder

Buchanan Ingersoll & Rooney

Peter Stathopoulos

Managing Director, State and Local Tax Practice

Bennett Thrasher

Eric Tresh

Partner & Co-Chair, State & Local Tax Practice

Sutherland Asbill & Brennan

Amanda Wilson

Shareholder

Lowndes Drosdick Doster Kantor & Reed

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