Many investors in partnerships, LLCs, and other entities treated as partnerships and their tax advisors struggle with the concepts and the operating rules that apply to Section 704(c). These rules potentially apply whenever property is contributed to such a partnership-treated entity or is distributed from such an entity.
The regulations under Section 704(c) provide a very flexible but very complicated set of rules for required allocations that apply to contributions of property and distributions of property from an entity that is treated as a partnership.
This presentation is designed to help the drafters of the basic operating documents for an entity treated as a partnership, including partnership agreements, operating agreements, and trust agreements; the tax return preparers for such entities; and those who structure transactions using such entities, understand and work with the Section 704(c) regulations. Various elections are available to adopt methods of allocation under Section 704(c), as well as information on so-called "reverse allocations."
Failing to have a proper understanding of these provisions can potentially result in unanticipated and adverse tax consequences for partners, members, and beneficiaries of partnership-treated entities.
What You'll Learn:Section 704(c) - General Concepts- Forward Allocations
- Reverse Allocations and Section 704(b)
Forward Allocations- Book Value vs. Tax Basis Issue
- Methods of Allocation
- Traditional Method
- Curative Allocations
- Remedial Method
Reverse Allocations- Section 704(b) Issue Upon Revaluation of Capital Accounts
- Aggregation Elections
Statutory Backstopping of Section 704(c)- Section 704(c)(1)(B)
- Section 737
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