Tax Allocation in Pass-Through Entities

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

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

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Conducted on Thursday, June 6, 2013

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Course Materials

This teleconference will provide guidance for tax advisers and tax preparers 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 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 preparing returns that conform to partners' expectations and produce neither an unexpected tax hit nor a conflict with partnership tax rules.

Listen as our authoritative panel 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. Sale or redemption of an interest in partnership/LLC
    1. Allocation of profit/loss in year of sale or redemption
    2. Allocations relating to potential section 734 basis step up
    3. Allocations relating to potential section 743 basis step up
    4. Termination of partnership

Benefits

The panel will explore these and other important topics:

  • 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

Leo Hitt
Leo Hitt
Partner
Reed Smith

Mr. Hitt's work covers taxation of businesses and business transactions, including syndications of limited...  |  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

Peter J. Withoff
Peter J. Withoff
Partner
Faegre Baker Daniels

Mr. Withoff is a partner in the Tax Group, focusing primarily on federal income tax matters. He has dealt with a wide...  |  Read More

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