PPC's Tax Planning for Partnerships will help you and your staff respond to client questions and capitalize on this steady growth in partnership filing and planning.

• ABOUT THE AUTHORS . . .
• LIST OF SUBSTANTIVE CHANGES AND ADDITIONS

• 100 INTRODUCTION
• 101 COMPARING PARTNERSHIPS TO OTHER BUSINESS ENTITIES
  • Recognizing Common Partnership Situations
    • Real Estate Limited Partnerships.
    • Oil and Gas Ventures.
    • Licensed Professionals.
    • Family Partnerships.
    • Limited Liability Companies Taxed as Partnerships.
  • Comparing Partnerships and Corporations
  • Benefitting from Limited Liability
  • Choosing a Tax Year
  • Understanding the Tax Effects of Contributing Property
  • Comparing Taxability of Income or Loss from Various Types of Entities
  • Understanding How Passive Loss Rules Apply to the Various Types of Entities
  • Comparing Employment Tax Liability
  • Accounting for Distributions to Owners
  • Accounting for the Sale of an Interest
  • Understanding State Tax Issues
  • Understanding the Formation Process
  • Analyzing the Cost Related to Formation
• 102 PROVIDING FRINGE BENEFITS AND RETIREMENT PLANS TO PARTNERS
  • Determining Which Nontaxable Fringe Benefits Are Available to Partners
  • Providing Health Insurance Alternatives to Partners
  • Understanding the Availability of Retirement Plans
    • Nonqualified Plans.
• 103 UNDERSTANDING THE CHECK-THE-BOX REGULATIONS AND THE DEFINITION OF A PARTNERSHIP
  • Identifying Entities That Are Eligible to Choose Entity Classification
  • Classifying Eligible Multi-owner Entities
  • Classifying Eligible Single-owner Entities
  • Classifying an Entity Owned by Husband and Wife
  • Being Aware of Issues Created by Single-member LLCs
  • Recognizing the Special Rules for Exempt Organizations and REITs
  • Understanding the Effect of Partnership Terminations and Divisions
  • Understanding the Default Classification Rules
  • Identifying Tax Consequences Resulting from an Elective Change in Classification
  • Understanding the Effect of a Change in the Number of Members in an Entity
• 104 UNDERSTANDING LIMITED LIABILITY COMPANIES
  • Recognizing Types of Businesses Likely to Operate as an LLC
    • Oil and Gas Operations.
    • Real Estate Ownership and Development.
    • Agriculture.
    • Professionals.
    • Family Businesses.
    • High-tech Companies.
    • Other Activities.
  • Understanding Extent of Limited Liability Protection
  • Classifying an LLC for Tax Purposes
  • Understanding How Partnership Tax Rules Apply to LLCs Classified as Partnerships
  • Converting a Partnership into an LLC
    • Conversion by Certificate.
    • Conversion by Merger.
    • Transfer of Partnership Interests to LLC.
    • Other Methods.
    • Consent to Conversion.
    • Reductions in the Partner's Basis.
• 105 BECOMING FAMILIAR WITH LIMITED LIABILITY PARTNERSHIPS (LLPs)
  • Understanding the Differences between LLCs and LLPs
  • Knowing the Key Tax and Nontax Considerations
    • Forming an LLP.
    • Meeting State Insurance Requirements.
    • Understanding Partners' Liability for Debts.
    • Understanding Which Laws Govern LLPs.
    • Choosing LLC Status for Single-member Entities.
  • Operating outside the State of Formation
  • Converting a General Partnership into an LLP
    • Converting via Registering as an LLP.
    • Converting via Liquidation or Merger.
    • Federal Income Tax Consequences.
• 106 DEALING WITH THE PARTNERSHIP ANTI-ABUSE REGULATIONS
• 107 RECOGNIZING WHEN A PARTNERSHIP IS REQUIRED TO FILE A TAX RETURN
• 108 ELECTING OUT OF PARTNERSHIP STATUS
  • Qualifying as an Investing Partnership
  • Qualifying as an Operating Agreement
  • Electing to Be Excluded from the Partnership Rules
  • Evaluating the Implications of Electing Out
  • Avoiding Partnership Status to Allow a Tax-deferred Exchange of Partnership Interest
• 109 DISTINGUISHING PARTNERSHIPS FROM CO-OWNERSHIP OF PROPERTY
• 110 PROPERLY ACCOUNTING FOR ORGANIZATION, SYNDICATION, AND START-UP COSTS
  • Accounting for Organization Costs
  • Accounting for Syndication Costs
  • Accounting for Start-up Costs
  • Knowing How to Elect and Implement IRC Sec. 195
  • Start-up Expenses Relating to an Investment Activity
  • Determining the Proper Treatment of Start-up Expenditures upon the Acquisition, Expansion, or Disposition of a Trade or Business
    • Identifying Expenses Related to Acquisitions.
    • Incurring Costs for Separate Taxable Entities.
  • Understanding the Section 263(a) Regulations
  • Treatment of Amounts Required to Be Capitalized under the Section 263(a) Regulations
  • Impact of Section 263(a) Regulations on Preopening Expenditures to Start Up a Brand New Business
    • IRC Sec. 195 vs. IRC Sec. 263(a).
    • Favorable Loopholes May Save the Day.
  • Tax Compliance Procedure for Preopening Expenditures to Start Up a Brand New Business
  • Impact of Section 263(a) Regulations on Preopening Expenditures to Expand an Existing Business
  • Impact of Section 263(a) Regulations on Preopening Expenditures to Make a Same-line-of-business Acquisition
  • Impact of Section 263(a) Regulations on Preopening Expenditures to Acquire a Dissimilar Business
  • Separate Section 263(a) Capitalization Rules for Certain Costs to "Facilitate" Acquisitive Transactions
    • Scope of Separate Rules.
    • Coordination with More-general Rules.
    • What Does Facilitate Mean?
    • Inherently Facilitative Costs Must Be Capitalized.
    • Inherently Facilitative Activities.
    • Covered Transactions for Inherently Facilitative Rule.
    • Exceptions for Employee Comp, Overhead, and De Minimis Amounts.
    • Exception for Business Integration Costs.
    • Exception for Costs before Bright-line Date.
• 111 UNDERSTANDING PUBLICLY TRADED PARTNERSHIPS
  • Tax Treatment of Publicly Traded Partnerships
  • Defining a Publicly Traded Partnership
  • Exceptions to Taxation of PTP as a Corporation
  • Identifying Special Passive Activity Provisions
• 112 STRUCTURING JOINT VENTURES INVOLVING TAX-EXEMPT ENTITIES
• 113 BECOMING FAMILIAR WITH SERIES PARTNERSHIPS AND LLCs
• 114 BEING AWARE OF STATE PARTNERSHIP ISSUES
  • Recognizing the Different Definitions of Taxable Income
  • Handling Multistate Partnerships and Multistate Partners
    • Pass-through Interests Can Create Nexus.
    • Apportioning Business Income.
• 115 STRUCTURING PARTNERSHIP AGREEMENTS
  • Understanding General Drafting Considerations
  • Differentiating General from Limited Partnerships
  • Identifying Who Should Be the General Partner(s)
    • Individuals as General Partners.
    • Business Entities as General Partners.
    • Trusts as General Partners.
  • Selecting and Adding Limited Partners
    • Trusts as Limited Partners.
    • Minors as Partners.
    • Admission of New Partners.
    • Nonfamily Member Partner.
  • Determining the General Partner's Rights and Responsibilities
    • Management Responsibilities.
    • Control over Assets.
    • Compensation for Services.
    • Right to Withdraw.
  • Structuring the Limited Partners' Interests
    • Participation in Management.
    • Admission of New Partners.
    • Transferability of Partnership Interests.
    • Withdrawal of a Limited Partner.
    • Ability to Cause a Liquidation.
  • Allocations of Income and Loss among Partners
  • Business Purpose Requirement
  • Including Buy/Sell Provisions in the Agreement
    • Transferability of Partnership Interests.
    • Valuation Provisions.
    • Funding Provisions.
• APPENDIX 1A : Comparison of Various Business Entities
• APPENDIX 1B : Liability Protection Provided under State LLP Statutes
• APPENDIX 1C : Electing to Be Excluded from the Partnership Rules ("Electing Out" of Subchapter K)
• APPENDIX 1D : Amortizing and Deducting Partnership Organizational Expenditures
• APPENDIX 1E : Amortizing and Deducting Start-up Expenditures
• APPENDIX 1F : Checklist to Determine Advisability of General versus Limited Partnership
• APPENDIX 1G : Partnership Agreement Due Diligence
• APPENDIX 1H: Sample Limited Partnership Agreement with Annotations
• APPENDIX 1I: Checklist for Electing Out of Subchapter K
• APPENDIX 1J : Citations of Sources Used in This Chapter

• 200 INTRODUCTION
• 201 ENSURING THAT CONTRIBUTIONS RECEIVE NONRECOGNITION TREATMENT
  • Determining the Timing and Valuation of Property Contributions
  • Documenting a Contribution
  • Recognizing When Gain or Loss Recognition Is Desirable
  • Underwriting Limited Partner Interests
• 202 DETERMINING PARTNER'S HOLDING PERIOD IN PARTNERSHIP INTERESTS ACQUIRED FROM PROPERTY CONTRIBUTIONS
  • Applying the Divided Holding Period Rules
• 203 NAVIGATING AROUND THE EXCEPTIONS TO THE NONRECOGNITION RULE
  • Handling Nonproperty Contributions
    • What Constitutes Property.
  • Importance of Valuation
  • Dealing with the Investment Company Partnership Rules
    • What Is Considered Stocks and Securities?
    • Tests to Be Considered an Investment Company.
    • Meaningful Diversification.
  • Contributing Assets Subject to Liabilities
  • Contributing Assets Subject to Nonrecourse Liabilities
  • Applying the Special Rules on Liability Assumptions
    • Contribution of Reg. 1.752-7 Liabilities.
    • Tiered Ownership Structures.
    • Regulations Applicable to Prior Periods.
• 204 DEALING WITH THE DISGUISED SALE RULES
  • Recognizing When a Disguised Sale of Property Takes Place
    • Bifurcation or Aggregation of Transfers.
    • Effect on Other Code Sections.
  • Applying the Rules to Nonsimultaneous Transfers
    • Two-year Rule.
  • Basis of the Transferor Partner's Interest in the Partnership
  • Structuring Payments to Avoid Disguised Sale Treatment
  • Guaranteed Payment or Preferred Return
  • Preferred Returns
  • Distribution of Operating Cash Flow
  • Reimbursing Preformation Expenses
  • Dealing with the Treatment of Liabilities in a Disguised Sale
    • What Are Qualified Liabilities?
    • Determining a Partner's Share of Partnership Liabilities for Disguised Sale Purposes.
    • Netting of Liabilities.
    • Incurring Liabilities Subsequent to the Partnership Receiving the Contributed Property.
    • Affect in Tiered Partnership Situations.
  • Required Disclosure
  • Understanding the Proposed Additional Disclosure Regulations Relating to Liabilities
  • Addressing the Proposed Regulations on Disguised Sales of Partnership Interests
    • Exception for Liquidating Distributions.
    • Assumption of Liabilities Resulting in a Disguised Sale.
    • Timing of a Disguised Sale.
    • Amount of Disguised Sale.
    • Interaction with Other Provisions.
    • Disclosure Requirements.
• 205 CONTRIBUTING PARTNERSHIP DEBT TO THE PARTNERSHIP
  • Installment Note
• 206 CONTRIBUTING PROMISSORY NOTES
  • Contributing Installment Obligations
• 207 CONTRIBUTING ZERO-BASIS RECEIVABLES
• 208 RECOGNIZING GAIN UNDER THE DEEMED REDEMPTION AND DISTRIBUTION RULES
• 209 CONTRIBUTING APPRECIATED OR DEPRECIATED PROPERTY
  • Distributions of Contributed Property
  • Character of Gains and Losses on Dispositions of Contributed Property
• 210 CONTRIBUTING LONG-TERM CONTRACTS
• 211 ACCOUNTING FOR DEPRECIATION AND DEPRECIATION RECAPTURE
• 212 TAXING NONCOMPENSATORY OPTIONS FOR PARTNERSHIP INTERESTS
  • Characterization of Noncompensatory Option Holders
  • OID Issues Related to Noncompensatory Partnership Options
• 213 CONTRIBUTING APPROPRIATE ASSETS TO A PARTNERSHIP
  • Marketable Securities
  • Real Estate
  • Closely Held Stock
  • Business Assets
  • Life Insurance
  • Inappropriate Assets to Contribute to a Partnership
    • S Corporation Stock.
    • Professional Corporation Stock.
    • Personal (Nonbusiness-related) Assets.
    • Retirement Plan Assets.
  • Passive Activity Losses
• 214 CONSIDERING ALTERNATIVES TO CONTRIBUTING PROPERTY
  • Loaning Money to the Partnership
  • Selling Property to the Partnership
  • Leasing Property to the Partnership
• APPENDIX 2A : Capital Contribution Agreement
• APPENDIX 2B : Contribution of Property Checklist
• APPENDIX 2C : Worksheet for Computing Gain on Contribution of Encumbered Property
• APPENDIX 2D : Carryforward Worksheet for Contributions of Property
• APPENDIX 2E: Client Letter Discussing the Formation of a Partnership by Contributing Property
• APPENDIX 2F : Citations of Sources Used in This Chapter

• 300 INTRODUCTION
• 301 UNDERSTANDING THE TAX TREATMENT OF A SERVICE PARTNER
  • Defining a Substantial Risk of Forfeiture
  • Receiving Unrestricted Property for the Performance of Services
  • Receiving Restricted Property for the Performance of Services
    • Identifying When a Substantial Risk of Forfeiture Exists.
  • Identifying When the Transferee Is Considered a Partner
  • Acquiring an Interest in Partnership Capital in Exchange for Services
  • Receiving a Profits-only Interest in Exchange for Services
  • Determining If Self-employment Tax Applies to Partnership Interests Acquired in Exchange for Services
  • Proposed Rules for Transfers of Partnership Interests for Services
  • No Partnership Gain or Loss Upon Compensatory Transfer of Partnership Interest
  • Timing of Partnership's Compensation Deduction
  • Capital Account Treatment
  • Partner or Nonpartner Status of Service Provider
  • Availability of Closing of the Books Method
  • Safe Harbor Rules for Valuing Transferred Interests
    • Vested versus Nonvested Partnership Interests.
    • Impact of Section 83(b) Election.
  • Forfeiture of Compensatory Interests
  • Collective Impact of Proposed Rules
• 302 ELECTING TO BE TAXED UPON RECEIPT OF RESTRICTED PROPERTY
  • Understanding the Benefits of a Section 83(b) Election
  • Understanding the Risks of Making a Section 83(b) Election
  • Knowing How to Make a Section 83(b) Election
• 303 VALUING PARTNERSHIP INTERESTS ACQUIRED IN EXCHANGE FOR SERVICES
  • Valuing Capital Interests
  • Analyzing the Effect of Nonlapse Restrictions and Minority Ownership
  • Valuing Profits Interests
  • Valuing an Interest Received for Services as Income in Respect of a Decedent
• 304 UNDERSTANDING THE TAX CONSEQUENCES TO THE PARTNERSHIP
  • Treating the Transfer as a Taxable Exchange
  • Treating a Transfer as an Expense or Capital Expenditure
  • Allocating the Expense or Basis Increase to the Proper Partners
• 305 ANALYZING THE EFFECT ON BOOK AND TAX BASIS CAPITAL ACCOUNTS
  • Transferring a Capital Interest
  • Transferring a Profits-only Interest
• 306 RECOGNIZING OTHER COMPENSATORY TRANSFERS OF PARTNERSHIP INTERESTS
• 307 CONSIDERING OTHER PLANNING IDEAS FOR TRANSFERS TO SERVICE PARTNERS
  • Contributing Property in Exchange for Partnership Interests
  • Contributing a Subscription Note
  • Attaching Substantial Risk of Forfeiture to Partnership Interest
  • Compensating a Service Provider through Fee Structure
  • Using Options to Acquire Partnership Interests
• APPENDIX 3A : Receipt of Restricted Property Treated as Current Compensation
• APPENDIX 3B : Sample Receipt from Transferor under IRC Sec. 83(b)
• APPENDIX 3C : Sample Client Letter--Transmittal of Section 83(b) Election
• APPENDIX 3D : Contribution of Services Checklist
• APPENDIX 3E: Sample Client Letter on Making a Section 83(b) Election
• APPENDIX 3F : Citations of Sources Used in This Chapter

• 400 INTRODUCTION
• 401 DETERMINING THE DIFFERENCE BETWEEN INSIDE AND OUTSIDE BASIS
  • Balancing Inside and Outside Basis
  • Knowing the Exceptions to the Equality of Inside and Outside Basis
  • Knowing When Temporary Basis Imbalances Occur
  • Rebalancing Inside and Outside Basis
  • Understanding the Difference between Tax-basis and Economic Balance Sheets
• 402 UNDERSTANDING THE FUNCTION OF BASIS
  • Analyzing the Fundamental Considerations
  • Reducing a Partner's Basis in Partnership Interest
  • Summarizing the Function of Basis
  • Understanding the Role Liabilities Play in Determining Basis
  • Comparing the Partnership and S Corporation Basis Rules
  • Understanding the Role Liabilities Play in Determining an LLC Member's Basis
• 403 CALCULATING BASIS
  • Knowing How to Calculate Basis by Using the Direct Method
    • Special Rule for Percentage Depletion Property Other Than Oil and Gas.
    • Character of Income or Deductions Is Irrelevant.
    • Syndication Expenses.
  • Selling Stock in Corporate Partner
  • Knowing When the Indirect Method of Calculating Basis Is Available
    • Determining a Partner's Proportionate Share of the Partnership's Basis.
    • Determining Each Partner's Share of Debt.
  • Assigning Responsibility for Basis Calculations
• 404 TIMING OF BASIS ADJUSTMENTS
  • Income or Loss from Operations--End of Year
  • Contributions and Distributions--Time of Event
  • Distinguishing Distributions from Advances or Draws
  • Ordering the Adjustments to Basis
  • Outside Basis Adjustment from Noncash Distribution
  • Regulations on Liability Assumptions
• 405 CALCULATING A SINGLE BASIS IN A PARTNERSHIP REGARDLESS OF HOW MANY DIFFERENT TYPES OF INTERESTS A PARTNER HOLDS
• 406 ANALYZING THE DIFFERENCE BETWEEN TAX-BASIS AND CAPITAL ACCOUNTS
• APPENDIX 4A : Annual Request for Partner Information
• APPENDIX 4B : Carryforward Worksheet--Partner's Outside Basis Calculation
• APPENDIX 4C : Carryforward Balance Sheet for Tracking the Inside Basis of Partnership Assets
• APPENDIX 4D: Client Letter on Ways to Create Additional Basis
• APPENDIX 4E : Citations of Sources Used in This Chapter

• 500 INTRODUCTION
  • Understanding the Basic Concepts
• 501 IDENTIFYING WHAT CONSTITUTES PARTNERSHIP LIABILITIES AND HOW THEY AFFECT THE BASIS OF PARTNERSHIP ASSETS
  • Defining Partnership Liabilities
  • Identifying Contingent Debts
  • Understanding When Debt Is Not Considered True Debt
    • Nonrecourse Debt.
    • Recourse Debt.
• 502 IDENTIFYING FACTORS THAT AFFECT HOW PARTNERSHIP LIABILITIES ARE ALLOCATED
  • Netting Liabilities
  • Determining the Character of Wrapped Debt
  • Understanding How Bifurcated Debt is Allocated
• 503 UNDERSTANDING THE DIFFERENCES BETWEEN RECOURSE AND NONRECOURSE LIABILITIES
  • Defining Recourse Liabilities
  • Defining Nonrecourse Liabilities
  • Identifying the Treatment of Nonrecourse Loans Made by Partners
  • Understanding the De Minimis Rule for Partner Nonrecourse Debt
• 504 SHARING RECOURSE LIABILITIES
  • Identifying Which Partners Have the Economic Risks Associated with Recourse Liabilities
  • Special Allocations
• 505 DETERMINING A PARTNER'S ECONOMIC RISK OF LOSS
  • Understanding the Concept of a No-value Liquidation
  • Defining a No-value Liquidation
  • Calculating a Partner's Net Payment Obligation
  • Timing and Valuing a Payment Obligation
  • Identifying Obligations Limited to the Value of Certain Property
  • Analyzing a Limited Partner's Economic Risk of Loss
  • Holding a Partnership Interest Through a Disregarded Entity
• 506 ANALYZING THE EFFECTS OF GUARANTEES AND SIMILAR ARRANGEMENTS
  • Guaranteeing Recourse Debt
  • Guaranteeing Nonrecourse Debt
  • Guaranteeing Debt
  • Analyzing Interest Guarantees
  • Anti-abuse Rules
  • Identifying Arrangements Considered to be Tantamount to a Guarantee
• 507 MAKING NONRECOURSE LOANS BETWEEN RELATED PARTIES
  • Determining the Impact of Related Party Loans and Guarantees
  • Identifying Related Parties
• 508 SHARING TRUE NONRECOURSE LIABILITIES
  • Calculating a Partner's Share of Minimum Gain (Tier One)
  • Calculating a Partner's Share of Section 704(c) Minimum Gain (Tier Two)
    • Allocating a Single Nonrecourse Liability among Multiple Properties.
  • Calculating a Partner's Share of Excess Nonrecourse Liabilities (Tier Three)
  • Client Profile: Illustrating the Differentiation between the Sharing of Partnership Nonrecourse and Partner Nonrecourse Debt
• 509 UNDERSTANDING HOW LIABILITIES ARE SHARED IN A TIERED PARTNERSHIP SITUATION
• 510 IDENTIFYING SITUATIONS AFFECTED BY LIABILITIES
  • Contributing Encumbered Property
  • Distributing Encumbered Property
  • Transferring Partnership Interests
  • Exchanging Partnership Property
  • Changing Profit and Loss Sharing Ratios
  • Admitting New Partners
  • Paying Partnership Liabilities
  • Triggering a Hot Assets Trap
  • Changing Partner or Partnership Status from General to Limited or Vice Versa
  • Converting a Partnership into a Limited Liability Company
  • Layering Multiple Liabilities
  • Dissociation of Partners
• 511 DISCHARGING PARTNERSHIP DEBT
  • Background
  • Determining a Taxpayer's Insolvency
  • Who Is the Taxpayer?
  • Analyzing the Effect of a Bankrupt Partner's Discharge of Partnership Recourse Debt
  • Determining the Effect on Basis
  • Making Basis Reduction Elections at the Partner Level
  • Special Partner Attribute Reduction Limitation
  • Timing of Partner's Attribute Reduction
  • Identifying the Impact of a Partner's Attribute Reduction on the Partnership's Return
  • Determining the Effect COD Has on Partner's Basis in a Partnership Interest
  • Discharging Qualified Real Property Business Debt
  • Understanding when COD Can Arise from Debt Modification
    • Acquisitions of Related Party Debt.
  • Issuing a Partnership Interest in Satisfaction of Partnership Debt
• 512 PROVIDING SERVICES TO A PARTNERSHIP IN BANKRUPTCY
  • Helping a Troubled Partnership Make the Decision to File
    • Advantages of Filing for Bankruptcy.
    • Disadvantages of Filing for Bankruptcy.
    • 2005 Bankruptcy Act Provisions.
  • Services Provided by a Practitioner in a Bankruptcy Proceeding
    • Valuation Services.
    • Expert Witness Services.
  • Administering the Engagement
  • Bankruptcy--The Basic Rules
  • Filing the Petition
  • Voluntary versus Involuntary Proceeding
  • Creation of the Bankruptcy Estate
  • Responsibilities of a Debtor
  • Responsibilities of the Bankruptcy Court
  • Resolution of Bankruptcy Proceeding
  • Discharge of Taxes in Bankruptcy
• 513 UNDERSTANDING THE FINAL REGULATIONS ON LIABILITY ASSUMPTIONS
  • Contribution of Reg. 1.752-7 Liabilities
  • Exceptions for Certain Transactions
  • Effect of Transfer on Contributing Partner's Basis
  • Effect of Liquidating Distribution on Contributing Partner's Basis
  • Effect on Basis of Reg. 1.752-7 Liability Assumption by a Partner Other Than the Contributing Partner
  • Notification Requirements
  • Tiered Ownership Structures
  • Regulations Applicable to Prior Periods
• APPENDIX 5A : Summary of Effective Date Rules of Old and New Provisions for Allocating Partnership Liabilities to Partners
• APPENDIX 5B : Consent to Treating a Partnership Interest as Depreciable Property
• APPENDIX 5C : Reducing Depreciable Asset Basis First for Excluded Debt Discharge Income
• APPENDIX 5D : Excluding Discharge of Indebtedness Income with Respect to Qualified Real Property Business Indebtedness
• APPENDIX 5E : Permanent File Worksheet--Partnership Liability Records
• APPENDIX 5F : Allocating Nonrecourse Debt
• APPENDIX 5G: Tax Considerations in Bankruptcy Checklist
• APPENDIX 5H: Comparison of Chapter 7 and Chapter 11 Bankruptcies
• APPENDIX 5I : Citations of Sources Used in This Chapter

• 600 INTRODUCTION
  • Determining If a Partnership Has Terminated
  • Understanding the Problems Created by Partnership Terminations
  • Choosing to Terminate a Partnership
• 601 PLANNING FOR THE DISCONTINUATION OF A PARTNERSHIP'S BUSINESS
  • Avoiding Discontinuation of a Partnership's Business
  • Understanding the Rules For Changes in Business Purpose
  • Understanding the Tax Effects of a Section 708(b)(1)(A) Termination
    • Organization Costs.
    • Syndication Costs.
    • Start-up Expenses.
    • Goodwill and other Section 197 Intangibles.
  • Addressing Nontax Issues Arising from Discontinuation of a Partnership's Business
• 602 DETERMINING WHEN A TERMINATION IS TRIGGERED BY A CHANGE IN FORM
  • Electing out of Partnership Status
  • Applying the Termination Rules When Only One Partner Remains
    • Planning for the Continuation of a Two-person Partnership.
    • Considering Sales of Partnership Interests That Result in Single-owner Disregarded Entities.
    • Understanding the Effect of a Partnership Bankruptcy.
• 603 USING THE TECHNICAL TERMINATION RULES TO THE BEST ADVANTAGE
  • Understanding the 12-Month Requirement
  • Preventing Termination by Selling Less than 50% of Capital or Profits
  • Delaying Ownership Changes to Avoid Termination
  • Using Revaluations to Prevent Termination
  • Structuring a Transaction to Avoid Sale or Exchange Treatment
  • Understanding When a Lower-tier Partnership Terminates
  • Determining What Constitutes a Sale or Exchange
    • Taking Advantage of the Technical Termination Rules.
    • Determining a Partner's Interest in Capital and Profits.
• 604 ANALYZING THE EFFECTS OF A TECHNICAL TERMINATION
  • Determining If Gain or Loss Will Be Recognized
  • Assigning Basis to the Partnership Interest Received
  • Calculating the Basis of Contributed Assets
  • Understanding the Effect on Precontribution Gain or Loss
  • Determining How to Treat Investment Credit Recapture
  • Understanding How a Termination Affects the Partnership Tax Year
  • Considering How a Termination Affects the Holding Period of the Partner and Partnership
  • Evaluating the Need to Make Partnership Elections
  • Using the Appropriate Employer Identification Number
  • Understanding the Effect of a Termination on Partnership Retirement Plans
  • Analyzing the Impact of a Termination on Installment Obligations
  • Determining How a Termination Affects Depreciation Methods
    • Bonus Depreciation.
    • Goodwill.
  • Considering Whether a Termination Results in Depreciation Recapture
  • Understanding the Impact of a Termination on Retirement Payments to Partners
  • Determining How a Termination Affects Suspended Losses
  • Deducting Organization Costs on Termination
  • Understanding the Effect of a Termination on Syndication Costs
  • Considering Whether to Deduct Start-up Costs on Termination
  • Determining the Basis of Transferred Start-Up and Syndication Costs
  • Understanding How a Termination Affects Section 704(b) Book Capital Accounts
  • Determining Whether a Termination Affects Partnership Minimum Gain
  • Accounting for Section 197 Intangible Assets after a Termination
• 605 DETERMINING THE EFFECTS OF A PARTNERSHIP TERMINATION UNDER IRC SEC. 708(b)(1)(A)
  • Determining If Gain or Loss Will Be Recognized
  • Calculating the Basis of Distributed Assets
  • Determining the Holding Period for Distributed Assets
  • Understanding the Effect of Termination on the Partnership's Tax Year
  • Analyzing How a Termination Affects Installment Obligations
  • Considering How Termination Affects Depreciation Methods
• 606 PLANNING FOR PARTNERSHIP MERGERS
  • Determining Whether a Merger Is an Assets-up or Assets-over Transaction
    • Transferring Appreciated or Depreciated Property.
  • Transfer of Reg. 1.752-7 Liabilities
  • Addressing Mergers of Highly-leveraged Partnerships
  • Planning for a Partner Buyout in Connection with a Merger
  • Understanding the Filing Requirements for a Partnership Merger
  • Applying the Merger Rules to Cross-species Mergers
  • Addressing Nontax Issues
    • Legal Requirements.
    • Administrative Requirements.
• 607 PLANNING FOR PARTNERSHIP DIVISIONS
  • Determining If a Division Is an Assets-over or Assets-up Transaction
  • Analyzing Divisions Involving Contributed Appreciated or Depreciated Property
  • Transfer of Reg. 1.752-7 Liabilities
  • Understanding the Filing Requirements for Divided Partnerships
  • Addressing Nontax Issues
• 608 INCORPORATING A PARTNERSHIP
  • Addressing Nonpartnership Issues
  • Benefiting from a Taxable Incorporation
  • Choosing the Form of the Incorporation
  • Structure 1: Partnership Contributes Its Assets to Corporation, and Then Liquidates
  • Structure 2: Partnership Liquidates, and Then Former Partners Contribute Assets to the Corporation
  • Structure 3: Partners Contribute Partnership Interests to Corporation, Which Causes an Automatic Liquidation of the Partnership
  • Client Profiles Illustrating Three Structures
    • Client Profile for Structure 1: Partnership Contributes Its Assets to Corporation, Then Liquidates.
    • Client Profile for Structure 2: Partnership Liquidates, Then Former Partners Contribute Assets to the Corporation.
    • Client Profile for Structure 3: Partners Contribute Partnership Interests to Corporation, Which Causes an Automatic Liquidation of the Partnership.
    • Comparing the Three Results.
  • Incorporating When There Are Cash-basis Receivables and Payables
• APPENDIX 6A : Checklist--Termination of a Partnership under IRC Sec. 708
• APPENDIX 6B : Determining Continuing Entity in Partnership Merger or Division
• APPENDIX 6C: Requirements for a Tax-free Contribution to a Corporation
• APPENDIX 6D : Citations of Sources Used in This Chapter

• 700 INTRODUCTION
• 701 UNDERSTANDING WHEN A PARTNER IS TREATED AS A PARTNER OR NONPARTNER
• 702 IDENTIFYING THE TYPES OF TRANSACTIONS THAT CAN OCCUR BETWEEN PARTNERS AND PARTNERSHIPS
  • Differentiating Loans from Capital Contributions
    • Making Loans to Partnerships.
    • Making Loans to Partners.
  • Taking Bad Debt Deductions for Partner Loans
    • Identifying the Character of a Bad Debt Loss Attributable to a Partner Loan.
    • Payment under Guarantee Agreement.
  • Distinguishing between Property Transfers and Disguised Sales
  • Performing Services for the Partnership
  • Handling Leases, Licenses, and Similar Transactions
  • Dealing with Passive Activity Issues
  • Paying Partnership Expenses
  • Differentiating a Partner from an Employee
  • Client Profile: Changing an Individual's Status from Employee to Partner
  • Identifying Who Is Responsible for Unpaid Partnership Trust Fund Taxes
  • Employing a Child of the Partners
• 703 HANDLING GUARANTEED PAYMENTS
  • Understanding Tax Consequences to the Partner
  • Understanding Tax Consequences to the Partnership
  • Determining a Guaranteed Payment in Relation to Partnership Income
  • Client Profile: Handing Guaranteed Payment When Partnership Income May Affect the Amount
  • Treating Health and Other Fringe Benefits Paid to Partners as Guaranteed Payments
  • Identifying Disguised Sale Guaranteed Payments
  • Dealing with Guaranteed Payments Made with Property
  • Using Stock of a Corporate Partner as Compensation
  • Applying Self-employment Tax to Guaranteed Payments
  • Addressing Passive Activity Loss Issues
• 704 ANALYZING THE EFFECTS OF TRANSACTIONS BETWEEN RELATED PERSONS
  • Avoiding Disallowed Losses from Sales or Exchanges
  • Proportionate Disallowance of Losses under IRC Sec. 267
  • Recharacterizing Capital Gain to Ordinary Income
  • Matching Income and Expense Deductions
  • Deferring Income on Installment Sales Between Related Parties
  • Avoiding Like-kind Exchange Limitations between Related Parties
  • Applying the Anti-churning Rules to Amortizable Intangibles
  • Understanding the Constructive Ownership Rules
• APPENDIX 7A : Determining Related Persons under IRC Sec. 707(b)(1) and (b)(2)
• APPENDIX 7B : Determining Related Persons under IRC Sec. 267(a)(2)
• APPENDIX 7C : Questionnaire for Determining if a Transaction between Partner and Partnership Requires Special Treatment
• APPENDIX 7D : Citations of Sources Used in This Chapter

• 800 INTRODUCTION
• 801 DEFINING HOT ASSETS SUBJECT TO THE COLLAPSIBLE PARTNERSHIP RULES
  • Identifying Unrealized Receivables Treated as Hot Assets
    • Bifurcation of Assets Subject to Recapture.
    • Analyzing Case Law Regarding Unrealized Receivables.
    • Applying the Hot Asset Rules to Partnerships Holding Long-term Contracts.
  • Identifying Inventory Treated as Hot Assets
    • Determining If Distributed Inventory Is Substantially Appreciated.
    • Avoiding Problems with Substantially Appreciated Inventory.
• 802 DETERMINING GAIN OR LOSS ATTRIBUTABLE TO HOT ASSETS
  • Determining the Value of Hot Assets
  • Valuing Unrealized Receivables
    • Valuing Rights to Receive Payments for Services.
    • Reducing Value for Costs of Providing Goods and Services.
    • Valuing Rights to Receive Payments for Goods.
    • Valuing Potential Recapture.
  • Valuing Inventory
  • Drafting an Allocation Agreement
  • Reporting Gain Subject to IRC Secs. 751 and 1250
  • Calculating the Basis of Hot Assets
• 803 RECOGNIZING WHICH TRANSACTIONS ARE SUBJECT TO THE HOT ASSET RULES
  • Applying the Hot Asset Rules to Sales or Exchanges
    • Reporting Noninventory Gains on the Installment Method.
  • Determining When a Distribution Is Subject to the Hot Asset Rules
    • Stepping through the Process.
  • Recognizing Section 751 Gain Upon Admission of a New Partner
  • Identifying Transactions Not Subject to the Hot Asset Rules
• 804 ANALYZING DISPROPORTIONATE DISTRIBUTIONS
  • Using an Exchange Table
  • Understanding How Disproportionate Distributions Affect Partners
  • Understanding How Disproportionate Distributions Affect Partnerships
    • Choosing the Property Exchanged.
  • Client Profile: Avoiding Current Recognition of Income by Selecting the Properties Included in a Deemed Sale under IRC Sec. 751.
  • Analyzing the First Option--A Prorata Sale
  • Analyzing the Second Option--Inventory Sold for Cash
  • Analyzing the Third Option--Inventory Sold for Securities
  • Comparing the Three Options
• 805 APPLYING THE HOT ASSET RULES TO TIERED PARTNERSHIPS
• APPENDIX 8A : Notice to Partnership from Transferring Partner
• APPENDIX 8B : Transferor's Tax Return Statement--Sale of Partnership Interest Involving Section 751 Assets
• APPENDIX 8C : Completed Form 8308
• APPENDIX 8D : Flowchart Analyzing Distribution of Property from Partnership to Partner
• APPENDIX 8E : Partnership Notification of Partner Sale of Partnership Interest Involving Sections 1250 and 751 Property
• APPENDIX 8F : Worksheet for Determining Applicability of IRC Sec. 751 to Sale, Exchange, or Distribution
• APPENDIX 8G: Sample Filled-in Worksheet for Determining Applicability of IRC Sec. 751 to Sale, Exchange, or Distribution
• APPENDIX 8H: Sample Exchange Table
• APPENDIX 8I : Citations of Sources Used in This Chapter

• 900 INTRODUCTION
  • The Ability to Make Special Tax Allocations
• 901 TESTING THE VALIDITY OF PARTNERSHIP ALLOCATIONS
  • Recognizing the Two Ways to Test Partnership Allocations
  • Knowing the Difference between Tax and Economic Allocations
• 902 UNDERSTANDING THE EFFECT THE PARTNERSHIP AGREEMENT HAS ON ALLOCATIONS
  • Addressing Allocations of Tax Results
  • Addressing Allocations of Economic Results
  • What Constitutes the Partnership Agreement?
  • Oral Modifications to Partnership Agreements
  • Making Changes to the Partnership Agreement after Year-end
• 903 UNDERSTANDING THE SUBSTANTIAL ECONOMIC EFFECT SAFE HARBOR RULES
  • Applying Both Parts of the Two-part Test
• 904 UNDERSTANDING HOW ALLOCATIONS ARE MADE ACCORDING TO PARTNERS' INTERESTS IN THE PARTNERSHIP--AN ALTERNATIVE TO THE SAFE HARBOR RULES
  • Determining Partners' Interests in the Partnership
  • Understanding Problems with Safe Harbor Depreciation Allocations
  • Applying the Ceiling Rule
• 905 MAKING ALLOCATIONS THAT HAVE ECONOMIC EFFECT
  • General Rule
  • Allocating Cancellation of Debt (COD) Income in a Manner That Has Economic Effect
  • Understanding the Deficit Capital Account Restoration Requirement
  • Relying on Qualified Income Offset as an Alternative to the Deficit Restoration Requirement
• 906 DETERMINING WHEN AN ALLOCATION HAS SUBSTANTIAL EFFECT
  • Understanding When an Allocation Is Substantial
    • Proposed Regulation Regarding Partnership Allocations Involving Look Through Entities.
  • Recognizing When a Shifting Allocation Occurs
  • Identifying Transitory Allocations
  • Right of a Partner to Reject a Special Allocation
• 907 MAINTAINING THE BOOK CAPITAL ACCOUNTS UNDER THE SAFE HARBOR RULES
  • Understanding Rules for Maintaining Accounts
  • Client Profile Illustrating Application of the Capital Account Maintenance Rules
  • Applying Selected Specific Book Capital Account Maintenance Rules
    • Section 709 Expenditures.
    • Basis Adjustments to Section 38 Property.
    • Section 754 Elections.
    • Liquidating Distribution to a Partner.
    • Guaranteed Payments under IRC Sec. 707(c).
• 908 KNOWING WHEN MANDATORY AND OPTIONAL REVALUATIONS OF BOOK CAPITAL ACCOUNTS ARE MADE
  • Identifying When Mandatory Revaluations Are Made
  • Identifying When Optional Revaluations Can Be Made
  • Knowing the Procedures to Follow for Revaluation
  • Client Profile Illustrating the Impact of Revaluing Capital Accounts
    • Calculating Gain on Sale When an Election to Revalue Was Made.
    • Figuring the Gain on Sale If There Is No Election to Revalue.
    • Calculating Loss on Sale When an Election to Revalue Was Made.
    • Figuring the Loss on Sale If There Is No Election to Revalue.
  • Client Profile Illustrating the Impact on Tax Depreciation of Revaluing Capital Accounts
    • Electing to Revalue the Contributed Property.
    • Deciding Not to Revalue the Contributed Property.
  • Reconciling Book/Tax Differences
  • Avoiding Use of Boilerplate Language
  • Identifying Reverse Section 704(c) Allocations
  • Client Profile Illustrating the Different Allocation Methods for Making Reverse Section 704(c) Allocations for Built-in Gains
    • Using the Remedial Method to Make Allocations.
    • Using the Traditional Method to Make Allocations.
• 909 UNDERSTANDING THE CEILING RULE LIMITATIONS
• 910 MAKING ALLOCATIONS ACCORDING TO IRC SEC. 704(c)
  • Aggregating Property for Making Allocations
  • Being Aware of the Anti-abuse Rule
  • Making Allocations Using the Traditional Method
  • Making Allocations Using the Traditional Method with Curative Allocations
  • Making Allocations Using the Remedial Allocation Method
  • Comparing the Results of the Three Prescribed Methods
    • Calculating Depreciation under the Remedial Allocation Method.
    • Amortizing Section 197 Intangibles under the Remedial Allocation Method.
  • Choosing an Allocation Method That Is Reasonable
    • Using the Undivided Interests Method.
    • Using the Oil and Gas Method.
  • Planning Opportunities for Allocating Built-in Gains
    • Why Is Choice of a Method Important?
  • Using the Section 704(c) Rules for Small Disparities
  • Making Allocations for Tiered Partnerships
  • Making Allocations That Involve Contributed Section 263A Property
  • Applying IRC Sec. 704(c) to Technical Terminations
  • Creating Section 704(c) Gain or Loss in an Assets-over Partnership Merger
  • Applying IRC Sec. 704(c) to Depreciation Recapture among Partners
  • Client Profile Illustrating Depreciation Recapture Related to Contributed Property
    • Using the Traditional Method.
    • Using Traditional Method with Curative Allocations.
    • Using the Remedial Allocation Method.
    • Comparing the Three Allocation Methods.
  • Client Profile Illustrating Depreciation Recapture for a Fully Depreciated Asset
    • Using the Traditional Method.
    • Using the Traditional Method with Curative Allocations.
    • Using the Remedial Allocation Method.
    • Comparing the Three Allocation Methods.
• 911 ALLOCATING LOSSES AND DEDUCTIONS ATTRIBUTABLE TO NONRECOURSE LIABILITIES
  • Understanding General Allocation Principles
  • Recognizing What Is a Nonrecourse Liability
  • Understanding the Concept of Minimum Gain
  • Allocating Nonrecourse Deductions under the Safe Harbor Provisions
  • Understanding the Mechanics of Minimum Gain
  • Allocating Minimum Gain Chargeback
  • Allocating Nonrecourse Deductions in Tiered Ownership Arrangements
  • Handling Minimum Gain and Book/Tax Differences
  • Client Profile Illustrating How to Allocate Nonrecourse Deductions to Account for Book/Tax Differences
  • Distributing the Proceeds of Nonrecourse Liabilities
  • Handling Nonrecourse Debt When a Partner Bears the Economic Risk of Loss
  • Identifying Exculpatory Liabilities
  • Determining Which Set of Nonrecourse Deduction Allocation Regulations Apply
• 912 MAKING ALLOCATIONS WITH RESPECT TO CONTRIBUTED PROPERTY
  • Regulations on Liability Assumptions
    • Treatment as Section 704(c) Item of Built-In Loss.
    • Tiered Ownership Structures.
    • Regulations Applicable to Prior Periods.
• 913 PROPERLY ALLOCATING CREDITS
• APPENDIX 9A : Checklist for Validity of Partnership Profit & Loss Allocations
• APPENDIX 9B : Worksheet to Compute Section 704(b) Book Capital Account
• APPENDIX 9C : Section 704(b) Minimum Gain Calculation
• APPENDIX 9D : Section 704(c) Carryforward
• APPENDIX 9E : Citations of Sources Used in This Chapter

• 1000 INTRODUCTION
• 1001 MAKING ALLOCATIONS WHEN THE PARTNERSHIP TERMINATES
• 1002 MAKING ALLOCATIONS WHEN THE PARTNERSHIP YEAR CLOSES FOR CERTAIN PARTNERS
• 1003 CHOOSING THE MOST BENEFICIAL METHOD FOR ALLOCATING PARTNERSHIP INCOME
  • Applying the Prorata Method
  • Understanding the Interim Closing Method
  • Allocating Gain to Different Interests Acquired at Different Times
  • Liquidating a Partner's Interest
  • Abandoning a Partnership Interest
  • Transferring a Partnership Interest by Gift
• 1004 APPLYING THE VARYING INTEREST RULE--RETROACTIVE ALLOCATIONS
  • Understanding Special Allocation Rules for Certain Cash-basis Items
  • Allocating Economic Income or Loss Differently from Taxable Income or Loss
  • Determining Which Method to Use
  • Retroactive Allocations Caused by Amending the Partnership Agreement
  • Retroactive Allocations Involving Tiered Partnerships
• APPENDIX 10A : Summary of Tax Allocation Rules When Partners' Interests Change
• APPENDIX 10B : Citations of Sources Used in This Chapter

• 1100 INTRODUCTION
  • Understanding the Pervasive Effects of Transferring Interests
  • Applying the Entity Theory
  • Identifying Sales or Exchanges
• 1101 CONVERTING A PARTNERSHIP INTEREST
  • Converting a General to a Limited Partner Interest (or Vice Versa)
  • Converting to or from LLC Status
    • Converting a General Partnership.
    • Converting a Limited Partnership.
    • Considering the Effect of Debt Assumption.
• 1102 ANALYZING THE TAX CONSEQUENCES OF A SALE OR EXCHANGE
  • Determining If Gain or Loss Is Recognized
    • Determining the Character of the Gain or Loss.
    • Using the Installment Method.
  • Calculating the Basis of a Partnership Interest
    • Understanding the Unitary Basis Concept.
    • Calculating Unitary Basis When Liabilities Are Included.
    • Applying the Unitary Concept to Disallow Losses on Partial Liquidations.
    • Understanding the General Rules for Determining Basis.
    • Electing the Optional Basis Adjustment on the Transfer of an Interest.
  • Dealing with Negative Capital Accounts
  • Client Profile: Evaluating Alternative Methods for Disposing of a Burned out Tax Shelter Investment
    • Retaining the Investment.
    • Selling the Property from the Partnership.
    • Selling the Partnership Interest.
    • Like-kind Exchange.
    • Making a Gift to a Family Member.
    • Making a Charitable Contribution.
    • Incorporating.
    • Allowing Foreclosure on Partnership Property.
    • Deeding the Property in Lieu of Foreclosure.
    • Abandoning the Property.
    • Death of Partner.
    • Investigating a Loan Workout as an Alternative to Sale or Exchange.
    • Summarizing the Results.
  • Making Allocations When Interests Are Sold
  • Determining When a Sale Causes Termination
  • Deducting Suspended Passive Losses and Credits
  • Considering the Family Partnership Rules
  • Transferring a Partial Interest
  • Recognizing Capital Gain on the Sale of a Profits Interest
  • Analyzing Transfers Resulting from a Divorce
  • Determining When Partnership Interests Have Divided Holding Periods
    • Analyzing the Impact of a Divided Holding Period on a Sale.
    • Considering Unexpected Problems from Divided Holding Periods.
  • Determining When Gain is Recharacterized under the Hot Asset Rules
    • Interaction of IRC Secs. 1250 and 751.
  • Using a Buy/Sell Agreement to Restrict Transfers of Partnership Interests
• 1103 CONVERTING CAPITAL LOSS TO ORDINARY LOSS
  • Applying the Corn Products Doctrine to Partnership Transactions
  • Attempting to Use Predisposition Distributions to Avoid Capital Losses
  • Claiming Abandonment, Forfeiture, or Worthless Losses
• 1104 LIQUIDATION AS AN ALTERNATIVE TO SALE OR EXCHANGE
  • Favorable Implications of Liquidations
  • Deducting Payments to Retiring Service Partners
  • Choosing Liquidation to Avoid Partnership Termination
  • Documenting the Transaction
• 1105 RECAPTURING TAX CREDITS
• APPENDIX 11A: Worksheet for Determining Gain or Loss on Disposition of a Partnership Interest
• APPENDIX 11B : Citations of Sources Used in This Chapter

• 1200 INTRODUCTION
• 1201 COMPUTING PARTNERSHIP TAXABLE INCOME
• 1202 CHOOSING AN ACCEPTABLE ACCOUNTING METHOD
  • Considering Use of the Cash Method
  • Reporting Income under the Cash Method
  • Deducting Expenses under the Cash Method
  • Weighing the Plusses and Minuses of the Cash Method
  • Reporting Income under the Accrual Method
  • Deducting Expenses under the Accrual Method
  • Weighing the Plusses and Minuses of the Accrual Method
• 1203 QUALIFYING FOR THE CASH METHOD OF ACCOUNTING
  • Qualifying for the Cash Method under IRC Sec. 448
    • Qualifying an LLC.
  • Form, Elections, and Implementation
  • Meeting the $1 Million Cash Method Exception
    • Treating Inventories as Materials and Supplies.
    • Taking Advantage of the $1 Million Exception.
  • Meeting the $10 Million Cash Method Exception
    • Determining the Principal Business Activity.
    • Accounting for Inventories.
    • Including Open Accounts Receivable.
    • Taking Advantage of the $10 Million Exception.
  • Determining If the Tax Shelter Prohibition Applies
    • Registered Securities.
    • Syndicate.
    • Tax Avoidance Motive.
  • Qualifying Small Partnerships with C Corporation Partners
    • Determining If a Partnership Has a C Corporation Partner.
    • Excluding Personal Service Corporations (PSCs).
  • Differentiating Supplies on Hand from Inventories
  • Segregating Activities Subject to the Accrual Method
  • Choosing a Hybrid Accounting Method
  • Handling Partnerships Engaged in Farming Business
  • Changing from the Cash to Accrual Method
• 1204 USING THE ACCRUAL METHOD OF ACCOUNTING
  • Reporting Income under the Accrual Method
  • Recognizing Income from Advance Payments
    • Advance Payments for Services.
    • Advance Payments for Service Agreements.
  • Recognizing Income from Prepaid Inventory Sales
  • Recognizing Income from Warranty Costs
  • Deducting Expenses under the Accrual Method
  • Meeting the Economic Performance Requirement
  • Identifying Liabilities Subject to the Payment Equals Performance Rule
  • Using the Recurring Item Exception to the Economic Performance Rules
  • Deducting Prepaid Expenses
• 1205 USING THE NONACCRUAL EXPERIENCE METHOD OF ACCOUNTING
• 1206 REPORTING INCOME FROM LONG-TERM CONTRACTS
  • Recognizing Exceptions to Percentage-of-completion Method
    • Home Construction Contract.
    • Small Contractor Exemption.
  • Qualifying to Use the Cash Method
  • Using the Completed Contract Method
  • Using the Percentage-of-completion Method
    • Using the Cost-to-cost Method.
    • Using the Simplified Cost-to-cost Method.
    • Electing to Use the 10% Method.
    • Applying the Look-back Method.
  • Applying the Special Rules for Manufacturing Contracts
  • Handling Mid-contract Changes in the Taxpayer
• 1207 CHANGING ACCOUNTING METHODS
  • Requesting an Accounting Method Change
  • Spread Period for Section 481(a) Adjustment
  • Using the Automatic Change Revenue Procedures
  • Making an Involuntary Accounting Method Change
• 1208 REVIEWING THE PARTNERSHIP'S TAX YEAR ALTERNATIVES
  • Determining the Partnership's Tax Year
  • Adopting a Tax Year
  • Reviewing the Options at Year-end
• 1209 UNDERSTANDING THE REQUIRED YEAR RULES
  • Applying the Majority Interest Rule
  • Applying the Principal Partners Rule
  • Applying the Least Aggregate Deferral of Income Rule
  • Tax Years of Partnerships with Foreign or Tax-exempt Partners
  • Recognizing When A Partnership's Required Year Changes
  • Obtaining Automatic Approval to Adopt, Change, or Retain a Required Tax Year
  • Recognizing the Impact of Partners' Year-end Changes on Partnership's Required Year
• 1210 ELECTING A NONCONFORMING TAX YEAR
  • Using the Natural Business Year Exception
    • Qualifying under the Annual Business Cycle Test.
    • Qualifying under the Seasonal Business Test.
    • Qualifying under the Gross Receipts Test.
  • Using a Facts and Circumstances Business Purpose Exception
  • Complying with the Terms and Conditions for Requesting a Change in Year-end
  • Requesting a Year Based on a Business Purpose
    • When to File.
• 1211 ELECTING A SECTION 444 FISCAL TAX YEAR
  • Evaluating Section 444 Election Options for Existing Partnerships (after the First Year)
  • Recognizing When a Section 444 Election Is Beneficial
  • Electing a Tax Year under IRC Sec. 444
  • Making Backup Section 444 Elections
  • Terminating a Section 444 Election
  • Required Payments (or Refunds) after Making the Section 444 Election
  • Making Required Payments
  • Timing of Refund Claim for Excess Required Payments
  • Quantifying the Benefits of Continuing the Election
• 1212 RECOGNIZING ELECTIONS THAT MUST BE MADE BY THE PARTNERSHIP
• APPENDIX 12A : Checklist to Determine Permissible Year-end for a Newly Formed (First Year) Partnership
• APPENDIX 12B : Checklist to Determine If Existing Partnership Can Change (or Retain) Its Year-end
• APPENDIX 12C : Worksheet for Computation of Annual Required Payment for Partnership with Section 444 Election in Effect
• APPENDIX 12D : Common Partnership Elections
• APPENDIX 12E: Treatment of Commonly Encountered Items under Cash and Accrual Methods
• APPENDIX 12F: Summary of Partnership Accounting Method Considerations
• APPENDIX 12G: Summary of Partnership Tax Year Considerations
• APPENDIX 12H : Citations of Sources Used in This Chapter

• 1300 INTRODUCTION
• 1301 MINIMIZING SELF-EMPLOYMENT TAX ON PARTNERSHIP INCOME
  • Handling Farm Rental Arrangements
  • Dealing With the Proposed Regulations
  • Other Strategies for Reducing Self-employment Tax
    • Guaranteed Payments.
    • Retirement Payments.
    • Personal Service Businesses.
• 1302 AVOIDING TAXATION ON INCOME EARNED OUTSIDE THE PARTNERSHIP
• 1303 DEFERRING GAIN WITH INSTALLMENT SALES
  • Avoiding the Interest Charge Rules
  • Electing out of the Installment Method
  • Making an Installment Sale to a Related Party
  • Recognizing the Exceptions to the Two-year Disposition Rule
• 1304 DEFERRING GAIN WITH LIKE-KIND EXCHANGES
  • Understanding the Effect of Boot on Gain Recognition
  • Structuring a Multi-party Exchange to Achieve Nontaxable Treatment
  • Using a Qualified Intermediary
  • Reverse Like-kind Exchanges
  • Considering an Exchange of Undivided Fractional Shares
    • Obtaining an IRS Ruling.
    • Identifying Replacement Property.
• 1305 CLAIMING THE SECTION 199 U.S. PRODUCER DEDUCTION
  • Identifying Activities that are Eligible for the Deduction
    • Identifying MPGE Activities.
    • Identifying Qualified Production Property (QPP).
    • Meeting the "In Significant Part" Requirement.
  • Handling Specific Activities
    • Construction Activities.
    • Identifying Engineering or Architectural Services.
    • Handling Food or Beverage Sales.
• 1306 DETERMINING W-2 WAGES FOR SECTION 199 PURPOSES
• 1307 DETERMINING QUALIFIED PRODUCTION ACTIVITIES INCOME FOR SECTION 199 PURPOSES
  • Determining Domestic Production Gross Receipts
  • Computing and Allocating Gross Receipts
  • Allocating Costs to Gross Receipts
  • Allocating Cost of Goods Sold to DPGR
  • Allocating Other Expenses or Losses to DPGR
• 1308 APPLYING THE SPECIAL SECTION 199 PASS-THROUGH RULES
  • Determining a Partner's Share of W-2 Wages
  • Using the Small Business Simplified Overall Method
  • Using the Simplified Deduction Method
  • Handling Expanded Affiliated Groups
  • Disposing of a Partnership Interest
  • Reporting the Deduction
• 1309 DEALING WITH TAX-EXEMPT PARTNERS
  • Structuring Partnerships with Exempt and Taxable Partners
  • Understanding the Depreciation Rules for Tax Exempt Partners
    • Depreciating Leased Property.
    • Applying the Qualified Allocation Rule.
  • Handling Leases Involving Tax-exempt Entities
  • Applying the Fractions Rule to Debt-financed Real Property
• 1310 MAXIMIZING DEPRECIATION DEDUCTIONS
  • Selecting the Best Depreciation Method
  • Claiming Bonus Depreciation under the GO Zone Act
  • Maximizing Depreciation for Assets in Particular Activities
  • Claiming the Section 179 Expense Deduction
  • Applying the Various Section 179 Limitations
  • Prorating the Section 179 Deduction Not Required
  • Planning for Late-year Equipment Purchases
• 1311 PROVIDING FRINGE BENEFITS TO PARTNERS AND EMPLOYEES
• 1312 FRINGE BENEFITS THAT ARE INCLUDABLE IN A PARTNER'S INCOME
  • Treating Benefits as Guaranteed Payments
  • Treating Benefits as a Distribution
  • Using Insured or Uninsured Medical Plans
    • Payments for Employees.
    • Payments for Partners.
    • Self-insured Medical Plans.
    • Self-employed Insurance Deduction.
    • Employing a Partner's Spouse.
  • Providing a Disability Plan
  • Offering a Cafeteria (Section 125) Plan
  • Providing Group-term Life Insurance Coverage
  • Furnishing Meals or Lodging for the Partnership's Convenience
  • Reimbursing Moving Expenses
  • Providing Employee Achievement Awards
  • Offering an Adoption Assistance Program
  • Providing Qualified Transportation Fringe Benefits
• 1313 ESTABLISHING AND MAINTAINING HEALTH SAVINGS ACCOUNTS
  • Handling Contributions and Distributions
  • Making Contributions for the Partners
  • Meeting the Comparability Rules
  • Comparing HSA with Flexible Spending Account
• 1314 FRINGE BENEFITS THAT ARE EXCLUDABLE FROM A PARTNER'S INCOME
  • Offering Educational Assistance Programs
  • Providing Dependent Care Assistance Programs
    • Requirements for a Qualified DCAP.
    • Nonqualified DCAPs.
    • Dependent Care Flexible Spending Arrangements.
  • Providing Section 132 Fringe Benefits
    • No-additional-cost Services.
    • Qualified Employee Discounts.
    • Working Condition Fringe Benefits.
    • De Minimis Fringe Benefits.
    • On-premise Gyms and Athletic Facilities.
• 1315 UNDERSTANDING THE RETIREMENT PLAN OPTIONS
  • Advantages and Disadvantages of Qualified Plans
  • Meeting the Requirements for Tax-favored Status
    • Permitted Disparity.
    • Participation and Coverage.
    • Vesting.
    • Nondiscrimination Requirements.
    • Top-heavy Plans.
  • Recognizing the Limits on Benefits and Contributions
  • Figuring the Limit on the Partnership's Deduction
  • Identifying the Key Features of Different Plans
• 1316 RECOGNIZING THE KEY FEATURES OF DEFINED BENEFIT PLANS
• 1317 RECOGNIZING THE KEY FEATURES OF DEFINED CONTRIBUTION PLANS
  • Offering a Profit Sharing Plan
  • Recognizing the Limited Appeal of Money Purchase Pension Plans
  • Establishing Cash or Deferred Arrangements [401(k) Plans]
  • Recognizing the Advantages of Roth 401(k) Plans
  • Offering SIMPLE 401(k) Plans
  • Providing New Comparability Plans
• 1318 RECOGNIZING THE KEY FEATURES OF SEPS AND SIMPLE PLANS
  • Understanding the Basic Rules for SEPs
  • Establishing a SEP
  • Understanding the Basic Rules for SIMPLE Plans
  • Establishing a SIMPLE Plan
  • Comparing SIMPLE IRA Plans with SEPs
• APPENDIX 13A: Computational Worksheet for Like-kind Exchanges
• APPENDIX 13B: Planning for the U.S. Producer Deduction
• APPENDIX 13C: Calculating the U.S. Producer Deduction
• APPENDIX 13D: Comparing Various Types of Qualified Retirement Plans
• APPENDIX 13E: Comparing SEPs and SIMPLE IRA Plans
• APPENDIX 13F: Citations of Sources Used in This Chapter

• 1400 INTRODUCTION
• 1401 UNDERSTANDING WHICH TAXPAYERS ARE SUBJECT TO THE AT-RISK RULES
• 1402 IDENTIFYING ACTIVITIES COVERED BY THE AT-RISK RULES
• 1403 RECOGNIZING WHEN ACTIVITIES CAN OR MUST BE AGGREGATED
• 1404 DETERMINING AMOUNTS CONSIDERED AT RISK
• 1405 UNDERSTANDING HOW TO BORROW AMOUNTS THAT WILL BE CONSIDERED AT RISK
  • Determining Whether Debt Increases a Partner's Amount at Risk
  • Understanding the Effect of Loan Guarantees
  • Borrowing Amounts from Related Taxpayers
• 1406 ANALYZING NONRECOURSE FINANCING SECURED BY REAL ESTATE
  • Applying the At-risk Rules to Tiered Ownership and Disregarded Entities
  • Understanding the Treatment of a Wraparound Mortgage
• 1407 RECAPTURING LOSSES WHEN THE AMOUNT AT RISK IS LESS THAN ZERO
• 1408 CARRYING OVER SUSPENDED AT-RISK LOSSES
  • Claiming Suspended At-risk Losses upon Transfer of Interest
    • Gift of At-risk Activity.
    • Bequest of At-risk Activity.
  • Transfer of At-risk Activity for Bankruptcy Estate
• 1409 UNDERSTANDING THE PRIORITY OF AT-RISK RULES VERSUS OTHER LIMITATIONS
• APPENDIX 14A : Carryforward Worksheet--Determination of Partner's Amount At-risk
• APPENDIX 14B : Carryforward Worksheet for Calculating Deductible At-risk Losses and Tracking Suspended At-risk Losses
• APPENDIX 14C: Client Letter Describing At-risk Rules that Limit the Deductibility of Losses
• APPENDIX 14D : Citations of Sources Used in This Chapter

• 1500 INTRODUCTION
  • Interaction with Other Limitations
• 1501 RECOGNIZING WHO IS SUBJECT TO THE RULES
• 1502 UNDERSTANDING THE TERMINOLOGY OF THE PASSIVE ACTIVITY RULES
  • Identifying Passive Activities
  • Determining How Interest Expense Is Treated under the PAL Rules
  • Identifying Rental Activities
  • Identifying Portfolio Activities
  • Applying the Self-charged Interest Rules
• 1503 DEALING WITH SPECIAL RULES FOR PARTNERS AND PARTNERSHIPS
  • Classifying Payments to Partners under the PAL Rules
  • Applying the PAL Rules to Sales of Partnership Interests
  • Applying the PAL Rules to Distributions in Excess of Basis
  • Reporting Passive Losses of Electing Large Partnerships
    • Classifying Debt Discharge Payments.
• 1504 UNDERSTANDING THE MATERIAL PARTICIPATION REQUIREMENTS
  • Applying the Objective Tests
    • Classifying Payments to Retiring Partners.
  • Determining a Limited Partner's Participation
    • Understanding Who Is Treated as a Limited Partner.
  • Understanding the Treatment of Partners in LLPs and Members of LLCs
  • Applying Additional Participation Rules
  • Understanding the Effect of the PAL Limitations on Self-employment Tax
• 1505 HANDLING RENTAL ACTIVITIES
  • Understanding the General Rule
  • Exceptions to the Definition of a Rental Activity
• 1506 GROUPING ACTIVITIES UNDER THE PAL RULES
  • Applying the General Rules for Grouping Activities
  • Grouping Rental Activities with Trade or Business Activities
  • Grouping Real and Personal Property Rentals
  • Restricting the Grouping of Certain Activities by Limited Partners
  • Applying the Consistency Requirement
  • Regrouping to Prevent Tax Avoidance
  • Grouping Activities Conducted through Partnerships or S Corporations
  • Understanding the Effect of Grouping on Dispositions
  • Understanding the Effects of Grouping on Material Participation
• 1507 RECHARACTERIZING PASSIVE INCOME
  • Identifying Significant Participation Activities (SPAs)
  • Handling the Rental of Nondepreciable Property
  • Applying the PAL Rules to Developer Sales of Rental Property
  • Understanding the Rules for Self-charged Rent
  • Handling Other Recharacterization Situations
• 1508 APPLYING THE SELF-CHARGED INTEREST RULES
  • Analyzing Loans from Partners to Partnerships
  • Analyzing Loans from Partnerships to Partners
  • Understanding the Treatment of Back-to-back Loans
  • Determining If an Activity Is Active
  • Understanding the Rules for Identically-owned Pass-through Entities
  • Electing out of the Self-charged Interest Rules
  • Identifying Other Self-charged Items
• 1509 TAKING ADVANTAGE OF THE EXCEPTION FOR OIL AND GAS WORKING INTERESTS
  • Applying the General Rule
  • Defining Limited Liability
  • Planning Opportunity
• 1510 APPLYING THE SPECIAL PAL EXCEPTION FOR REAL ESTATE PROFESSIONALS
  • Understanding the General Rule
  • Identifying Eligible Taxpayers
  • Electing to Aggregate Activities
    • Revoking the Election.
  • Understanding the Effects of Holding Limited Partner Interests
  • Grouping Interests Held by Partnerships
  • Applying the Rules to Joint Returns
  • Understanding the Restriction on Employees
  • Deducting Suspended Losses
  • Coordinating with the $25,000 Offset for Rental Real Estate
• 1511 DEDUCTING CASUALTY GAINS AND LOSSES UNDER THE PAL RULES
• 1512 DISPOSING OF PROPERTY USED IN A PASSIVE ACTIVITY
• 1513 USING LOSSES AND CREDITS FROM PASSIVE ACTIVITIES
  • Computing Passive Loss Carryovers
  • Deducting Suspended Losses on a Disposition
  • Deducting Passive Credits
• 1514 UNDERSTANDING HOW THE PAL RULES AFFECT ALTERNATIVE MINIMUM TAX
• 1515 MINIMIZING TAXES BY USING THE RENTAL REAL ESTATE EXCEPTION
  • Defining Active Participation
• 1516 DEDUCTING SUSPENDED LOSSES UPON DISPOSITION
  • Determining When a Complete and Fully Taxable Disposition Occurs
  • Transferring Interests to Related Parties
  • Disposing of an Interest by Gift
  • Disposing of Interests Held through Partnerships
  • Disposing of an Interest in an Installment Sale
  • Disposing of an Interest at Death
  • Identifying Changes That Are Not Dispositions
  • Understanding How Tax-deferred Dispositions Affect Suspended Losses
  • Transferring Passive Activities to a C Corporation
  • Transferring a Passive Activity to or from a Bankruptcy Estate
• 1517 BEING FAMILIAR WITH THE AUDIT TECHNIQUE GUIDE ON PASSIVE ACTIVITY LOSSES
• APPENDIX 15A : Tests for Determining Material Participation
• APPENDIX 15B : Worksheet for Grouping Activities under the Passive Loss Rules
• APPENDIX 15C : Electing Out of the Self-charged Interest Rules
• APPENDIX 15D : Treating All Interests in Rental Real Estate Activities as a Single Activity
• APPENDIX 15E : Carryforward Worksheet for Tracking Suspended Passive Losses
• APPENDIX 15F : Table Showing Treatment of Suspended Losses on Disposition of a Passive Activity
• APPENDIX 15G: Sample Log to Document Participation
• APPENDIX 15H: Client Letter on Impact of PAL Rules on Rental Property Ownership
• APPENDIX 15I : Citations of Sources Used in This Chapter

• 1600 INTRODUCTION
  • Tax Planning Using Partnership Distributions
• 1601 IDENTIFYING WHAT IS A DISTRIBUTION
  • Distinguishing Loans from Distributions
  • Analyzing Preferred Distributions
• 1602 DIFFERENTIATING CURRENT AND LIQUIDATING DISTRIBUTIONS
• 1603 ANALYZING CURRENT DISTRIBUTIONS
  • Applying the General Nonrecognition Rule
  • Differentiating Advances or Draws from Other Distributions
  • Planning the Order of Cash and Property Distributions
  • Planning the Type of Property to Distribute
    • Accounts Receivable and Inventory.
    • Cash and Marketable Securities.
  • Recognizing That Losses on Current Distributions Are Not Allowed
  • Understanding How Current Distributions Affect Basis
  • Basic Decreases Not Allocable to Stock of Corporate Partner
  • Determining How to Depreciate Distributed Property
  • Understanding the Treatment of Future Inventory Sales
  • Applying the Depreciation Recapture Rules
  • Being Aware of Special Rules when Distributions Follow Property Contributions
  • Analyzing Distributions of Long-term Contracts
  • Analyzing Distributions of Regulation 1.752-7 Liabilities
  • Analyzing Distributions of Qualified Small Business Stock (QSBS)
  • Analyzing Distributions of Encumbered Property
• 1604 ANALYZING DISTRIBUTIONS IN COMPLETE LIQUIDATION OF A PARTNERSHIP INTEREST
  • Determining the Order of Distributions
  • Planning the Type of Property to Distribute
    • Cash and Marketable Securities.
    • Section 1231 Property.
  • Determining the Holding Period of Distributed Assets
  • Recognizing a Loss on a Liquidating Distribution
  • Understanding How Liquidating Distributions Affect Basis
    • Mandatory Basis Adjustments.
• 1605 RECOGNIZING GAIN ON DISTRIBUTIONS OF MARKETABLE SECURITIES
  • Limiting the Amount of Gain Recognized
    • Applying the Rules to an "Assets Over" Division.
  • Adjusting the Distributee Partner's Basis
  • Distributing Marketable Securities to Contributors of Appreciated Property
  • Applying the De Minimis Rule
  • Understanding the Anti-abuse Rule
  • Coordinating with Other Code Sections
  • Applying the Marketable Securities Rules to Technical Terminations
• 1606 DISTRIBUTING PROPERTY TO PARTNERS OTHER THAN THE CONTRIBUTING PARTNER
  • Recognizing Gain or Loss
    • Applying the Special Rules for Installment Obligations.
    • Understanding the Effect of Postcontribution Events.
  • Understanding the Timing of Gain Recognition
  • Understanding How Gain Recognition Affects Basis
  • Determining the Tax Treatment of Successor Partners
  • Applying the Like-kind Distribution Exception
  • Applying the Partnership Liquidation Exception
  • Analyzing the Effect of a Technical Termination
  • Understanding the Impact of an Assets-over Merger
  • Recognizing Other Exceptions to Gain Recognition
• 1607 MAKING DISTRIBUTIONS TO CONTRIBUTORS OF APPRECIATED PROPERTY
  • Recognizing Gain
    • Applying the Special Rules for Installment Obligations.
  • Understanding the Exception for Previously Contributed Property
  • Coordinating the Section 737 Rules with Other Provisions
  • Identifying Other Exceptions
  • Adjusting the Basis of the Distributee's Partnership Interest
  • Analyzing the Effect of a Technical Termination
  • Understanding the Impact of an Assets-over Merger
• 1608 HANDLING SPECIAL RULES AND PROBLEMS
  • Applying the Hot Asset Rules
  • Determining the Character of Income Received on a Subsequent Sale of Unrealized Receivables or Inventory
  • Determining the Holding Period of Property Received in Partnership Distributions
  • Exploring the Concept of Disappearing Basis
  • Analyzing Debt-financed Distributions
  • Distributing Partner Debt
    • Analyzing the Distribution of Partner Subscription Notes.
    • Analyzing the Distribution of a Partner's Ordinary Loan.
    • Analyzing the Distribution of Partner Debt Acquired From a Third Party.
  • Analyzing Distributions of Stock to Issuer Corporations
  • Distributing a Controlling Interest in a Corporation to a Corporate Partner
  • Depreciating Distributed Properties
  • Recognizing Depreciation Recapture
  • Analyzing Distributions in Connection with the Performance of Services
• APPENDIX 16A : Distribution Checklist
• APPENDIX 16B : Flowchart of IRC Sec. 732(c) Partner Basis Allocation Rules
• APPENDIX 16C : Worksheet for Computing Partner's Basis in Property Received in Partnership Distribution
• APPENDIX 16D : Depreciation Recapture Rules
• APPENDIX 16E : Distributions of Contributed Property--Computing Contributing Partner's Gain or Loss and Distributee's Basis in Property
• APPENDIX 16F : Distributions to Contributors of Appreciated Property--Computing Gain to Distributee Partner and Tax Basis of Property
• APPENDIX 16G : Citations of Sources Used in This Chapter

• 1700 INTRODUCTION
• 1701 UNDERSTANDING THE GENERAL RULE FOR TAXING RETIREMENT PAYMENTS
  • Effective Date of the General Rule
  • Making Payments for Partnership Property under the General Rule
  • Identifying Other Payments
  • Understanding the Tax Treatment of Payments Under the General Rule
  • Defining Unrealized Receivables
  • Understanding the Treatment of Payments for Goodwill
• 1702 UNDERSTANDING THE SPECIAL RULE FOR TAXING RETIREMENT PAYMENTS TO SERVICE PARTNERS
  • Allocating Payments between IRC Secs. 736(a) and 736(b)
  • Designating Payments as Section 736(b) Payments
  • Allocating Fixed Payments
  • Changing a Partner's Share of Partnership Liabilities/Being Relieved from Partnership Debt
  • Making Variable Payments
  • Combining Fixed and Variable Payments
  • Accounting for Unrealized Receivables, Substantially Appreciated Inventory, and Goodwill
  • Recognizing Income or Gain
  • Understanding the Basis Recovery Rules and Election to Prorate
  • Making the Election to Prorate Basis
  • Determining Whether Self-employment Tax Applies to Section 736(a) Payments
  • Dealing with Passive Activity Implications
  • Receiving Payments from a Successor to the Partnership
• 1703 INCLUDING ASSETS OTHER THAN CASH IN RETIREMENT PAYMENTS
  • Client Profile: Distributing Partnership Assets Other than Cash as Retirement Payments
    • Maximum Cash Allocated to Section 736(a) Payments.
    • Maximum Cash Allocated to Section 736(b) Payments.
    • Proration of Cash and Property between Section 736(a) and Section 736(b) Payments.
• 1704 DECIDING WHETHER TO SELL OR LIQUIDATE A PARTNERSHIP INTEREST
  • Client Profile: Comparing a Liquidation and a Sale of a Partnership Interest
  • Retirement of Interest
  • Sale of Interest
  • Partnership Liquidation and Sale When Capital Is a Material Income-producing Factor
  • Close of Partnership Year
• 1705 ACCOUNTING FOR THE DEATH OF A PARTNER
  • Determining the Effect on the Partnership Tax Year
  • Allocating Distributive Shares of Partnership Income/Loss in the Year of Death
  • Computing Self-employment Income in Year of Death
  • Valuing Partnership Interests for Estate Tax Purposes
  • Determining Income in Respect of a Decedent
  • Determining the Successor's Basis and Making Basis Adjustments
  • Premortem Planning Strategies
    • Buy/Sell Agreements.
    • Successor in Interest.
    • Estate Freezes.
    • Valuation Discounts.
  • Postmortem Planning Strategies
• APPENDIX 17A : Prorating Basis Recovery upon Liquidation of a Partnership Interest
• APPENDIX 17B : Allocation of Partnership Liquidation/Retirement Payments between Sections 736(a) and 736(b)--Fixed Payments
• APPENDIX 17C : Allocation of Partnership Liquidation/Retirement Payments between Sections 736(a) and 736(b)--Variable Payments
• APPENDIX 17D : Carryforward Schedule--Partnership Liquidation/Retirement Payments
• APPENDIX 17E : Citations of Sources Used in This Chapter

• 1800 INTRODUCTION
• 1801 PLANNING FOR TRANSFERS OF PARTNERSHIP INTERESTS
  • Understanding When Mandatory Adjustments Are Required
    • Electing Investment Partnerships.
    • Making the Election to be an EIP.
    • Tiered Ownership Structures.
    • Securitization Partnerships.
  • Identifying the Advantages of an Optional Basis Adjustment
  • Stepping up Basis upon the Death of a Partner
    • Transferee's Basis in Partnership Interest.
    • Income in Respect of a Decedent (IRD).
    • Application to Community Property.
  • Computing the Optional Basis Adjustment Resulting from a Transfer
  • Calculating Adjustment When Appreciated (or Depreciated) Property Was Previously Contributed
    • Using a Section 754 Election for MLP Units.
  • Planning for Partnership Termination
  • Adjusting the Basis of a Long-Term Contract
• 1802 PLANNING FOR DISTRIBUTIONS OF PROPERTY
  • Understanding the Purpose of the Optional Basis Adjustment
  • Understanding when Mandatory Adjustments Are Required
  • Computing the Optional Basis Adjustment Resulting from a Distribution
  • Determining the Effect of a Previous Optional Basis Adjustment
  • Distributing Property with Optional Basis Adjustment for One Partner to Another Partner
  • Allocating Optional Basis Adjustments When a Partner Retires
• 1803 ALLOCATING THE OPTIONAL BASIS ADJUSTMENT AMONG THE PARTNERSHIP ASSETS
  • Allocating Basis Adjustments Arising from a Transfer of a Partnership Interest
    • Ordinary Income Class of Property.
    • Capital Gain Class of Property.
  • Allocation within a Class
    • Transferred Basis Exchanges.
    • Subsequent Transfers.
  • Allocating Basis Adjustments from a Distribution of Property
  • Timing of Adjustment
  • Allocations to Stock of Corporate Partner
  • Goodwill
    • Amortization of Goodwill.
• 1804 MAKING THE SECTION 754 ELECTION
  • Revoking a Section 754 Election
  • Tiered Partnerships
• 1805 HANDLING OPTIONAL BASIS ADJUSTMENTS ALLOCABLE TO DEPRECIABLE PROPERTY
• 1806 ALLOCATING PARTNERSHIP BASIS TO TRANSFEREE PARTNERS UNDER IRC SEC. 732(d)
  • Making the Election
• 1807 AMORTIZING GOODWILL
  • Defining Section 197 Intangibles
  • Applying the Amortization Rules to Partnerships
  • Recognizing Other Applicable Rules
  • Avoiding the Anti-churning Rules
• APPENDIX 18A : Events That Can Trigger an Optional Basis Adjustment
• APPENDIX 18B : Making the Optional Basis Adjustment
• APPENDIX 18C : Statement Regarding Basis Adjustment Due to Section 754 Election
• APPENDIX 18D : Adjusting the Basis of Distributed Partnership Assets
• APPENDIX 18E : Transfers of Partnership Interests--Determining and Allocating Basis Adjustments Resulting from Section 754 Elections for Sales or Exchanges [IRC Sec. 743(b)]
• APPENDIX 18F: Distributions of Property--Determining and Allocating Basis Adjustments Resulting from Section 754 Elections for Distributions (Section 734)
• APPENDIX 18G : Allocation of Basis Adjustment Resulting from a Transfer or Distribution to Goodwill under IRC Sec. 755
• APPENDIX 18H: Election to Be Treated as an Electing Investment Partnership (EIP) under IRC Sec. 743(e)
• APPENDIX 18I : Citations of Sources Used in This Chapter

• 1900 INTRODUCTION
  • Understanding the Potential Benefits Available through Family Partnerships
  • Reviewing Potential Concerns
• 1901 UNDERSTANDING THE FAMILY PARTNERSHIP INCOME TAX RULES
  • Applying the Family Partnership Rules Beyond Family Context
  • Understanding the Effect of the Anti-abuse Rule
• 1902 IDENTIFYING DIFFERENCES BETWEEN INCOME AND TRANSFER TAX RULES
• 1903 RECOGNIZING DONEES AS PARTNERS
  • Understanding the Safe Harbor Rules
  • Identifying a Capital Interest in a Partnership
  • Understanding When Capital Is a Material Income-producing Factor in a Partnership
  • Meeting the Alternative Test
• 1904 IDENTIFYING DONEE STATUS IN FAMILY SETTINGS
• 1905 TREATING A DONEE AS A REAL OWNER
  • Structuring a Legally Effective Transfer
  • Understanding Transfer Restrictions and Retained Controls over Management
  • Retaining Control over Partnership Assets and Income
  • Making Outsiders Aware of the Partnership's Existence
  • Following Formalities When Forming a Family Partnership
  • Working with Limited Partner and Limited Liability Company Interests
  • Identifying Whether There Is a Tax Avoidance Motive
  • Recognizing a Donee as a Partner
  • Making Gifts in Trust or to Minors
  • Making Gifts in Trust
  • Making Gifts to Minors
• 1906 MAKING ALLOCATIONS BETWEEN DONORS AND DONEES
  • Following the Special Family Partnership Allocation Rules
  • Allowing for Reasonable Compensation Paid to the Donor
  • Sharing Income Proportionately Between Donor's and Donee's Capital Interests
• 1907 USING LIMITED PARTNERSHIPS AND LIMITED LIABILITY COMPANIES IN FAMILY SITUATIONS
• 1908 ADDRESSING THE EFFECTS OF LIABILITIES
• 1909 RECOGNIZING OTHER TAX CONSIDERATIONS IN FAMILY TAX PLANNING SITUATIONS
  • Understanding how Section 704(c) Allocations affect Family Partnership Allocations
  • Addressing Investment Company Concerns and Other Issues Regarding Contributed Properties
• 1910 FORMING A FAMILY PARTNERSHIP
  • Selecting the Appropriate Type of Partnership
  • Getting the Family Partnership Up and Running
    • Draft Partnership Agreement.
    • Register Limited Partnerships with the State.
    • File Assumed Name Certificate.
    • Retitle Assets and Amend Contracts.
    • Obtain Tax Identification Number.
  • Ensuring the Continuing Validity of the Family Partnership
    • Observe Gifting Formalities.
    • File Appropriate Tax Returns.
    • Observe Operational Formalities.
    • Observe Partner Formalities.
• APPENDIX 19A : Family Partnership Income Taxation Questionnaire
• APPENDIX 19B : Checklist for Forming a Family Partnership
• APPENDIX 19C : Citations of Sources Used in This Chapter

• 2000 INTRODUCTION
  • Being Aware of IRS Hostility toward Family Partnerships
  • Recognizing the Possibility of an IRS Audit
• 2001 UNDERSTANDING THE DIFFERENCES BETWEEN INCOME TAX AND TRANSFER TAX RULES
• 2002 ANALYZING ISSUES THAT ARISE UPON THE DEATH OF A PARTNER
  • Valuing a Partnership Interest for Estate Tax Purposes
  • Identifying Income in Respect of a Decedent
  • Making Basis Adjustments
  • Understanding What Happens to Suspended Losses
  • Paying Estate Taxes
• 2003 RECOGNIZING THE PARTNERSHIP AS AN ENTITY
  • Establishing a Business Purpose/Economic Substance
  • Including Personal Use Assets in a Partnership
• 2004 INCLUDING PREVIOUSLY GIFTED INTERESTS IN DONOR'S ESTATE
  • Applying IRC Sec. 2036 to Family Partnerships
  • Retaining Rights of Enjoyment
  • Retaining the Right to Designate Who Will Enjoy Partnership Property
  • Qualifying for the Bona Fide Sale Exclusion
    • Bona Fide Sale.
    • Adequate and Full Consideration.
  • Recognizing Fiduciary Duties
  • Reviewing Family Partnerships in Light of Strangi II and Other Recent Cases
  • Transferring Stock of Controlled Corporations to Family Partnerships
• 2005 RECOGNIZING AVAILABLE ESTATE PLANNING OPPORTUNITIES
  • Diverting Future Appreciation
  • Unitizing Ownership/Consolidating Title
  • Making Annual Exclusion Gifts of Partnership Interests
  • Making Charitable Donations of Partnership Interests
  • Using Buy-sell Agreements
  • Choosing the Successor in Interest
• 2006 STRUCTURING ESTATE FREEZES UNDER THE TRANSFER TAX VALUATION RULES
  • Dealing with Family Partnership Issues
  • Structuring the Income Stream
  • Meeting the Substantial Economic Effect Rules
  • Being Aware of the Risks Associated with the Freeze Technique
  • Client Profile: Structuring a Partnership to Comply with the Estate Freeze Rules
  • Valuing Transferred Interests
  • Applying Limitations on Buy-sell Values
  • Responding to Recent IRS Arguments
  • Changing Liquidation and Voting Rights and Restrictions
  • Responding to IRS Gift on Formation Attack
  • Avoiding Indirect Gifts of Contributed Property
• 2007 UTILIZING MINORITY INTEREST AND OTHER DISCOUNTS
  • Discounting the Value of Gifts to Family Members
  • Recognizing IRS Attacks on Valuation of Fractured Entities
  • Understanding the Importance of an Appraisal
  • Understanding How Liquidity of Assets Affects the Amount of Discount
  • Creating an Intentionally Defective Grantor Trust
• 2008 USING LIFE INSURANCE IN ESTATE PLANNING
  • Avoiding Incidents of Ownership
  • Using an Irrevocable Life Insurance Trust
  • Avoiding Transfer for Value Problems
  • Client Profile: Using a Partnership to Hold Buy-sell Life Insurance
• 2009 ADDRESSING OTHER TAX CONSIDERATIONS
• 2010 MARKETING ESTATE PLANNING SERVICES
• 2011 MANAGING AN ESTATE PLANNING ENGAGEMENT
  • Using an Engagement Letter
  • Setting Goals
  • Gathering Data
  • Developing the Estate Plan
  • Communicating the Results
    • The Estate Planning Report.
  • Implementing and Monitoring the Estate Plan
    • Implementing the Estate Plan.
    • Periodic Monitoring.
• APPENDIX 20A: Guidelines for Forming Family Limited Partnerships (To Avoid IRC Sec. 2036)
• APPENDIX 20B: Guidelines for Operating Family Limited Partnerships (To Avoid IRC Sec. 2036)
• APPENDIX 20C: Citations of Sources Used in This Chapter

• 2100 INTRODUCTION
• 2101 DEALING WITH THE FRAUDULENT TRANSFER LAWS
  • Recognizing What Is a Fraudulent Transfer
  • Understanding the Importance of Intent
  • Recognizing Actual Fraudulent Intent
  • Recognizing Constructive Fraudulent Intent
• 2102 UNDERSTANDING THE IMPORTANCE OF SOLVENCY
  • Beginning the Solvency Analysis
  • Counting Assets for Solvency Purposes
  • Counting Liabilities for Solvency Purposes
  • Differentiating Present and Future Creditors
  • Implementing the Asset Protection Plan
• 2103 USING A LIMITED LIABILITY ENTITY TO PROTECT PERSONAL ASSETS
  • Recognizing the Limits on Limited Liability
  • Avoiding the Trust Fund Recovery Penalty
    • General Partner's Liability.
    • LLC Member's Liability.
    • Operating Agreement Provisions.
    • Spreading the Blame.
    • Employer Payment.
• 2104 USING GENERAL PARTNERSHIPS AND LIMITED PARTNERSHIPS
  • Ensuring Partnership Classification for Tax Purposes
  • Understanding the Asset Protection Characteristics of Partnerships
  • Charging Order as a Deterrent to Creditors
  • Using Limited Partnerships with Corporate General Partners
  • Recognizing Other Pertinent Considerations
• 2105 USING LIMITED LIABILITY COMPANIES
  • Understanding the Asset Protection Aspects of LLCs
  • Charging Order as a Deterrent to Creditors
  • Using Series Partnerships and LLCs
  • Using Single-purpose Entities
  • Classifying LLCs for Federal Tax Purposes
  • Converting a Partnership into an LLC
  • Using Professional LLCs
  • Identifying the Situations Where Using an LLC Makes Sense
    • Real Estate Activities.
    • Professional Practices.
    • Family Businesses.
  • Dealing with the Uncertainty Surrounding LLCs
• 2106 USING LIMITED LIABILITY ENTITIES FOR PROFESSIONALS
  • Using Limited Liability Partnerships
  • Comparing LLPs to LLCs
  • Comparing LLPs to Professional Corporations
  • Converting a Partnership to an LLP
  • Converting a Corporation to an LLP
  • Reducing the Tax Cost by Excluding Goodwill
  • Converting an S Corporation to an LLP
• 2107 ESTABLISHING A FAMILY LIMITED PARTNERSHIP FOR ASSET PROTECTION PURPOSES
  • Understanding the Basic Family Limited Partnership Structure
  • Avoiding Fraudulent Transfer Problems
  • Drafting a Certificate of Limited Partnership
  • Funding the Family Limited Partnership
  • Complying with the Business Purpose Rule
  • Designating the General Partner(s)
  • Protecting FLP Assets from Creditors of the General Partner
  • Using Corporate or LLC General Partners to Limit Personal Liability
  • Understanding the Consequences of Limited Partner Status
  • Investigating and Establishing an FLP
• 2108 UNDERSTANDING THE ASSET PROTECTION BENEFITS OF A FAMILY LIMITED PARTNERSHIP
  • Understanding Inside-out Protection
  • Understanding Outside-in Protection
  • Understanding the Charging Order Remedy
  • Recognizing When a Charging Order Is Not a Creditor's Sole Remedy
  • Minimizing the Effects of a Forced Sale of a Partner's FLP Interest
• 2109 DEALING WITH A CREDITOR ATTACK ON A FAMILY LIMITED PARTNERSHIP
  • Surviving under the Threat of a Charging Order
  • Using Multiple FLPs to Protect Assets from Entity-level Liability
• 2110 USING FAMILY LIMITED LIABILITY COMPANIES
• 2111 COMBINING A DOMESTIC LIMITED PARTNERSHIP WITH AN OFFSHORE TRUST
  • Determining Whether the Client Will Benefit from an Offshore Trust
  • Forming a Domestic Partnership to Hold Domestic Assets
  • Understanding How the OAPT-DLP Structure Thwarts Creditors
  • Dealing with a Creditor's Attack
• APPENDIX 21A : Client Affidavit Regarding Financial Condition
• APPENDIX 21B : Diagram of Alternative Family Limited Partnership Arrangement
• APPENDIX 21C : Steps in Forming a Family Limited Partnership
• APPENDIX 21D : Citations of Sources Used in This Chapter

• 2200 INTRODUCTION
• 2201 BEING AWARE OF SPECIAL ACCOUNTING TREATMENT SPECIFIED IN AGREEMENT OR HYBRID ACCOUNTING METHODS
  • Special-purpose Report Based on the Basis of Accounting Specified in the Partnership Agreement
  • Preparing Financial Statements on a Basis of Accounting Specified in the Partnership Agreement Intended for General Use
  • Client Interpretations of the Partnership Agreement
• 2202 REPORTING FEDERAL INCOME TAXES
• 2203 REPORTING STATE INCOME AND FRANCHISE TAXES
• 2204 ACCOUNTING FOR GUARANTEED PAYMENTS TO PARTNERS
• 2205 ACCOUNTING FOR LOANS BETWEEN PARTNERS AND THE PARTNERSHIP
• 2206 REPORTING THE EQUITY SECTION OF THE BALANCE SHEET
• 2207 PREPARING THE STATEMENT OF CHANGES IN PARTNERS' CAPITAL
• 2208 ACCOUNTING FOR CHANGES IN PARTNERSHIP INTEREST
  • Accounting Issues
  • Admitting a New Partner
    • Using the Bonus Method.
    • Using the Goodwill Method.
  • Accounting for the Withdrawal or Death of a Partner
    • Using the Bonus Method.
    • Using the Goodwill Method.
• 2209 ACCOUNTING FOR INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES
• 2210 ACCOUNTING FOR PARTNERSHIP RETIREMENT PLANS
• 2211 ILLUSTRATIVE FINANCIAL STATEMENTS AND SAMPLE ACCOUNTANTS' REPORTS FOR PARTNERSHIPS
• 2212 CHANGING THE LEGAL FORM OF THE ENTITY
• APPENDIX 22A: Partnership--Compiled, Income Tax Basis, Full Disclosure
• APPENDIX 22B : Partnership--Compiled, Accrual Basis, Full Disclosure

• INTRODUCTION
• SECTION I
  • OVERVIEW
  • Part 1--Basis in Partnership Interest
  • Part 2--Termination of a Partnership
  • Part 3--Collapsible Partnerships
  • Part 4--Family Partnerships
  • GLOSSARY FOR CPE SECTION I
  • EXAMINATION FOR CPE CREDIT
  • COURSE EVALUATION
• SECTION II
  • OVERVIEW
  • Part 1--Partnership Status and Organization
  • Part 2--Contributions of Services
  • Part 3--Partner and Partnership Transactions
  • Part 4--At-Risk Limitations
  • GLOSSARY FOR CPE SECTION II
  • EXAMINATION FOR CPE CREDIT
  • COURSE EVALUATION