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Structuring Tiered Partnerships: Advanced Tax Planning Strategies, Avoiding Tax Traps

Treatment of Allocations and Deductions, Application of Sec. 704 and 743

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

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Conducted on Tuesday, October 25, 2022

Recorded event now available

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This CLE/CPE course will guide tax counsel on the available tax planning strategies in structuring tiered partnerships. The panel will discuss tax considerations for structuring tiered partnerships, treatment of allocations and deductions, the impact of tax reform and IRS partnership audit rules, the application of Sec. 743, and practical methods to avoid tax traps associated with tiered structures.

Description

Tiered partnership arrangements are ownership structures where one pass-through entity, a lower-tier entity, is owned by one or more other taxable entities, an upper-tier entity, allowing limited liability, asset protection, and tax advantages for owners. Despite these advantages, implementing tiered structures involves a careful analysis of complex rules and regulations to avoid unintended tax consequences.

Beyond the planning methods associated with the protection of assets and shielding liability, one of the most complex areas related to tiered partnership arrangements involves the contribution of property. Tiered partnership rules under Sections 704(c) and 743(b) may not yield the expected tax benefits to a taxpayer. For instance, a taxpayer who pays fair market value for a partnership interest with associated Section 704(c) property may not receive the desired tax deduction if the property is subsequently contributed to another partnership. An understanding of structuring methods to work around this issue will avoid this result.

In addition to structuring obstacles relating to the contribution of property and the treatment of allocations and deductions, tax counsel and advisers must consider items provided under tax reform, such as the applicability of the 20 percent pass-through tax deduction. Furthermore, tax advisers should analyze the IRS partnership audit rules allowing a push-out election.

Listen as our panel explains tax rules impacting tiered partnership arrangements, treatment of allocations and deductions in the contribution of property, the impact of tax reform and IRS partnership audit rules, and effective methods to avoid unintended tax consequences to taxpayers.

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Outline

  1. Treatment of allocations and deductions in tiered partnerships
  2. Contributions of property and Section 743(b)
  3. Obstacles in issuing profits interest and other equity incentives in tiered structures
  4. Impact of tax reform and IRS partnership audit rules
  5. Effective methods in avoiding tax traps and best practices for tax counsel

Benefits

The panel will review these and other critical issues:

  • Treatment of allocations and deductions under Sections 704(c) and 743(b) for an upper-tier entity
  • Potential tax issues associated with the contribution of property to a lower-tier entity
  • Tax implications in issuing profits interest and other equity incentives in tiered structures
  • The impact of tax reform and IRS partnership audit rules on tiered partnership arrangements
  • Tax planning techniques and best practices for tax counsel in structuring tiered partnerships

Faculty

Borden, Bradley
Professor Bradley T. (Brad) Borden
Professor of Law
Brooklyn Law School

Professor Borden’s research, scholarship, and teaching focus on taxation of real property transactions and...  |  Read More

Mandarino, Joseph
Joseph C. Mandarino
Partner
Smith Gambrell & Russell

Mandarino is a Partner in the Tax Practice of Smith, Gambrell & Russell, LLP.  His practice focuses on...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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