Surgent's Basis Shifting: Final Regulations - Connecticut Society of CPAs

Overview

The Internal Revenue Service has targeted complex partnerships it believes are not in compliance with the tax law for audit. One of the abuses the IRS has attacked is transfers of interests in partnerships which result in an increase in the basis of a partner who is subject to a high marginal income tax rate. This perceived abuse results in lower income tax and/or a higher basis in partnership property for the higher marginal income tax partner.

The final regulations basically characterize certain partnership-related basis adjustments as transactions of interest on the part of the IRS. In a practical sense, this means that property transfers in a partnership with related party partners may run the risk of IRS scrutiny if audited. It is common for certain types of partnerships, such as real estate limited partnerships, to have related-partner partnerships. The IRS may decide to scrutinize partnerships with related party transfers.

Since these final regulations presume an understanding of the rules for partnership distributions and Section 754 elections, the program begins with coverage of those two topics, with time devoted to adjustments under both Section 743(b) and Section 734(b). It would be hard to understand the IRS’s claim of abuse without a working knowledge of these transactions.

Objectives

Understand the final regulations addressing basis shifting from one related party partner in a partnership to another

Highlights

What is a transaction of interest?
Reporting transactions of interest on Form 8886
Why make a Section 754 election?
Adjustments under Sections 743(b), 734(b), and 732
Applicable threshold amounts for reporting
What is a basis shift?
Who is a material advisor and why is that status important?
Section 755 rules for allocating the Section 743(b) and Section 734(b) basis adjustments
Transfers of a partnership interest on death
What is a substantially similar transaction?
Who is a “tax-indifferent” party in a partnership?

Designed For

Tax practitioners who will be advising clients who have an interest in a partnership that is impacted by the new final regulations on basis transfers from one related-party partner to another

Prerequisites

A basic understanding of partnership taxation

Preparation

None

Notice

To access this program, log into your CTCPA account at https://www.ctcpas.org/my-cpe/upcoming and click on the orange "Launch Event" button.

Fees

Credits

Level

Code

Vendor

Fields of Study

Leader(s):

Michael Tucker, Surgent McCoy CPE, LLC

Leader Bios

Michael Tucker, Surgent McCoy CPE, LLC

MICHAEL J. TUCKER, CPA, MBA, J.D., LL.M., Ph.D. Mike is an employee of Surgent McCoy CPE, LLC. He authors materials and scripts for the monthly Edward Jones sponsored All Star Tax programs. Mike also writes materials for and conducts almost daily webinars on a variety of tax related topics. Mike works in the offices of T. M. Byxbee Company, CPAs, Mike’s duties at T.M. Byxbee Co. involve advising individual and business clients on a wide variety of transactional matters. Mike was formerly a professor of accounting at Quinnipiac University, in Hamden, CT, where he taught graduate and undergraduate law and tax programs. Mike received his J.D. from New York University and his LL.M. from Georgetown University Law Center. He is a CPA and received his Ph.D. from the University of Houston.

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