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

Determining Substantial Economic Effect, Distinguishing Targeted and Regulatory Allocations

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

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Conducted on Tuesday, November 9, 2021

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel and advisers with the guidance necessary to implement targeted partnership tax allocations correctly. 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 advisers must provide clients with guidance on whether this method will capture all allowed benefits.

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

Tax advisers and counsel must also differentiate between targeted and regulatory allocations. For example, target allocation agreements may not satisfy regulatory safe harbors but can still meet the economic effect equivalence test or the partners' interest in the partnership test. Failing to come under regulatory safe harbors may impact the availability of other favorable rules.

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

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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 high priority issues:

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

Faculty

Longman, Robb
Robb A. Longman
Managing Member
Longman & Van Grack

Mr. Longman represents his clients in business matters, tax planning and litigation, as well as estate planning. He...  |  Read More

Stauber, David
David Stauber
Partner
Winston & Strawn

Mr. Stauber focuses his practice on the federal income tax aspects of mergers and acquisitions, fund formation, and...  |  Read More

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