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

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Program Materials

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.

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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?

Faculty

Fowler, Lynn
Lynn E. Fowler

Partner
Kilpatrick Townsend & Stockton

Mr. Fowler's practice specializes in tax-efficient strategies for a variety of business entity formation,...  |  Read More

Brock, Noel
Noel P. Brock

Assistant Professor
Eastern Michigan University

Mr. Brock is an assistant professor at Eastern Michigan University, where he teaches and researches in the...  |  Read More

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