Cummings & Lockwood

Webinar - IRC Section 743(b) Basis Adjustments

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Applying the 754 Election to Distributions of Partnership Property, An Advanced Case Study of Calculations and Considerations

December 15, 2015

Author: Janice H. Eiseman

Janice H. Eiseman will be a panelist for a webinar concerning IRC Section 743(b) Basis Adjustments:  Applying the 754 Election to Distributions of Partnership Property, An Advanced Case Study of Calculations and Considerations.

This webinar is being provided by:

Strafford Continuing Education Webinars
590 Dutch Valley Road, N.E.
Atlanta, Georgia  30324-07294

Please register at:  http://www.straffordpub.com/webinars

This webinar will cover how, and whether, to make a basis adjustment when a partnership distributes a partnership interest under Section 743(b). This is an election the partnership can make when there is a sale or exchange of a partnership interest, or upon the death of a partner. It changes the partnership’s basis in its assets with regard to the transferee (new partner), so there is often a realignment of the existing partners’ tax basis as well. This can impact the amount of gain/loss each of the partners recognizes when the partnership sells or retires some of its assets.

Description

Making proper decisions about electing a basis adjustment when a partnership distributes a partnership interest under Sect. 743(b) can be one of the most challenging issues facing partners and their tax advisors. Partnerships may make a 754 election when a “triggering event” occurs, such as certain types of distribution of property from the partnership to a partner, or when a partnership interest is transferred by sale or exchange or upon the death of a partner, and adjust between the value of the outside basis to the new/transferee partner (either purchase price or value of the interest at date of death), and the new partner’s share of the partnership’s adjusted basis in the partnership property.

The election and adjustments can have different impacts on different partners, so tax advisers need to fully grasp the tax implications of making the election, and utilizing the optional basis adjustments.

Tax advisers must not only understand the rules but also the practical calculations, allocations and reporting mechanics of the 754 election, and especially of the Section 743(b) basis adjustments. Failure to understand the “moving pieces” of the optional basis adjustments under Section 743 can result in unnecessary tax issues for the individual partners—some of whom might be your clients.

Listen as our panel of veteran advisers provides practical guidance in the form of a detailed case study on the ins-and-outs of the Section 743(b) adjustments and allocations, leaving you prepared to advise on the planning and compliance tasks of this complex area of partnership taxation.

Outline

  • Section 754 election and interaction between Sections 754-755
  • Sect. 743(b) adjustments on transfer of partnership interests
    • Transactions giving rise to adjustments under Sect. 743(b)
    • Mandatory basis adjustments under Sect. 743(b)
  • Computation of Sect. 743(b) adjustments
  • Allocation of Sect. 743(b) adjustment among partnership assets under Sect. 755
  • Allocation under Sect. 755 upon taxable sales or exchanges
  • Allocation under Sect. 755 upon non-recognition transactions
  • Case sudy and planning considerations

Benefits

The panel will review these and other key issues:

  • Mechanics of making a Section 754 election at partnership level and understanding “inside basis” vs. “outside basis”
  • Purpose of optional basis adjustment under Section 743(b)
  • Rules governing the ability to make a Sction 755 election due to a transfer under 743(b)
  • Calculate and allocate the Section 743(b) optional basis adjustment
  • Practical, detailed examples of partnership transfer scenarios, and analysis of proper decisions in those situations

Learning Objectives

After completing this course, you will have a thorough understanding of the basis adjustments, both mandatory and optional, that accompany a Section 754 election. You will know how to calculate a 743(b) basis adjustment in the event of a partnership distribution, and you will understand the ordering rules in allocating the adjustments. You will have detailed knowledge on how to report 743(b) basis adjustments on a partner’s tax return, and you will be able to discuss and apply the planning opportunities and consequences of basis adjustments within the context of a 754 election.