Tax Allocation in Partnerships and LLCs

Minimizing Tax Impact Through Strategic Allocation of Income, Gains, Losses and Liabilities

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

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Conducted on Wednesday, February 6, 2013

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Course Materials

This teleconference will provide guidance for tax counsel on tax allocation provisions for partnerships and LLCs taxed as partnerships. The panel will outline steps to meet the tax goals for both the partners and the entity.

Description

Allocation provisions in partnership and LLC agreements are complex to administer and subject to highly specialized rules regarding the handling of gains, losses, depreciation and other tax attributes. The provisions must balance the IRS regulations and the agreement's distribution provisions.

How well the contractual provisions reflect the desired allocation of gains and losses among partners is critical. Unexpectedly high income or loss on partners' tax returns can unravel a deal in which much time and expense has been invested.

Awareness of all applicable IRS regulations and guidance, and familiarity with others' best practices, is essential to crafting tax allocations that conform to partners' expectations and produce neither an unexpected tax hit nor a conflict with partnership tax rules.

Listen as our authoritative panel of tax counsel and advisors reviews the terms and impact of current federal rules on allocation of income, contributed property and liabilities, as well as other key subjects such as distribution rules, adjustments, and sale of interests in partnerships and LLCs. The panel will offer strategies to meet the partnership's or LLC's goals and minimize tax consequences.

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Outline

  1. Allocation of income
    1. 704(a)
    2. Constraints of 704(b) and 704(c)
    3. Economic effect
    4. Substantiality
    5. Denied allocations
    6. Allocation of deductions attributable to non-recourse debt
  2. Allocation of contributed property
    1. Allocations of tax gain or loss
    2. Cost recovery deductions
    3. Depreciation methods
    4. Remedial allocation methods
    5. Aggregation of properties
    6. Tiered partnerships
  3. Allocation of liabilities
    1. Recourse liabilities under Section 752
    2. Non-recourse liabilities and related deductions under Sections 752 and 704(b)
  4. Distribution rules
    1. Distribution of multiple properties
    2. Cash distributions
    3. Non-cash distribution
    4. Receipt of cash and property
  5. Adjustments to basis of partnership/LLC assets
    1. Following transfer of partnership interest
    2. Distributions of partnership property
    3. Allocating the adjustment amount among partnership properties
  6. Sale of an interest in partnership/LLC
    1. Tax consequences associated with sale
    2. Hot assets and Section 751(a)
    3. Collectibles gain and unrecaptured Section 1250 gain
    4. Installment sales
    5. Termination of partnership

Benefits

The panel will review these and other key questions:

  • What are the potential economic consequences of a special allocation to a partner or LLC member?
  • What are the potential consequences when a partner or LLC member has a negative balance in his/her capital account?
  • How do partners bear the economic risk of loss for recourse debt?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Saba Ashraf
Saba Ashraf
Partner
McKenna Long & Aldridge

She concentrates on the structuring and effecting of complex business transactions. Her practice focuses on corporate...  |  Read More

Jed A. Roher
Jed A. Roher
Atty
Godfrey & Kahn

He concentrates his practice on federal corporate and partnership tax law and assists clients with a variety of tax...  |  Read More

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

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