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Income Tax Accounting for Partnerships and Partners – Capital Accounts, Basis, Purchase and Sale of Partnership Interest, and Effects (LITX04/23)

Event Description

Part 2 (of this two part course) focuses on the effect on a partner (or LLC member) and partnership (including an LLC taxed as a partnership) of the purchase and sale of a partnership interest.

A discussion will be held under the BBA (Centralized Partnership Audit Rules (CPAR)) Partnership Rules as to when a partnership itself may be income taxable and partners may be liable for partnership level tax for a time period prior to the time they joined the partnership (and how to prevent such a travesty).

Enrolled Agent Approved

Designed For

CPAs, EAs and Attorneys who prepare partnership returns and/or advise partners on transaction planning.

Objectives

• To learn the general rules and exceptions for income taxation of the sale of a partnership interest
• To highlight the income tax effect on the seller of the sale of a partnership interest 
• To explore whether to make (or not) a §754 election 
• To understand the effect of the BBA partnership audit rules on purchasers and sellers of partnership interests 

Major Subjects

• Entity vs. aggregate theories – When it matters
• Treatment of seller – Capital gains treatment, collectibles gain, prior unrecaptured §1250 gain, ordinary income from hot assets, etc.
• Collapsible partnerships
• Effect of partner’s share of liabilities
• Sales of either general or limited partnership interests
• Holding period of partnership interest under different scenarios
• 3.8% look through NIIT tax on sale of partnership interest
• Treatment of purchaser – Optional basis adjustments via §754 election
• The built-in loss exception 
• Allocation of interest expense incurred to acquire partnership interest
• Effect of purchase or sale on continuing partners 
• Effect of BBA partnership audit rules on buying or selling partners