Partnership Income Taxation

by Gunn, Alan

• ISBN13: 9781587787560
• ISBN10: 1587787563
• Edition: 4th
• Format: Nonspecific Binding
• Copyright: 2005-03-30
• Publisher: West Academic

Summary

This handbook examines partnership tax laws, enabling readers to easily understand specific provisions within a larger context. Some of the topics covered include what constitutes a partnership; partnerships vs. corporations; partnership vs. co-ownership of property; the pass-through principle of partnership taxation; an introduction to partnership debt; allocations of partnership income; transactions between partnerships and their partners; sales of partnership interests; partnership distributions; payments to retiring partners; and the death of a partner.

Table of Contents

Preface	p. v
The Pass-through Principle of Partnership Taxation	p. 1
Introduction	p. 1
Illustration	p. 3
The Timing of Partnership Income	p. 5
The Duration of a Partnership	p. 6
Partners as Self-Employed Taxpayers	p. 6
The "Anti-Abuse" Regulations	p. 8
Comparison with Subchapter S	p. 10
An Introduction to Partnership Basis and Limits on Losses	p. 11
The Tax Basis of Partnership Interests and Partnership Property	p. 11
The Effects of Partnership Debt Transactions Upon Basis	p. 13
Limits on the Deductibility of Partnership Losses	p. 14
Section 704(d)	p. 15
The at-Risk Rules of Section 465	p. 16
The Passive-Loss Rules of Section 469	p. 17
Comparison with Subchapter S	p. 19
Contributions to Partnerships	p. 21
Contributions of Property	p. 21
The Statutory Pattern	p. 21
Holding Periods	p. 22
Contributions of Encumbered Property	p. 23
Depreciation Recapture	p. 24
Character Issues: Section 724	p. 25
Contributions of Services	p. 26
Receipt of an Interest in Partnership Capital	p. 26
Receipt of an Interest in Partnership Profits	p. 29
Contributions Distinguished from other Transactions	p. 35
Contribution vs. Sale to Partnership	p. 36
Contribution vs. Sale or Exchange between Partners	p. 39
Comparison with Subchapter S	p. 39
Allocations of Partnership Income, Deductions, and Credits: An Introduction	p. 43
An Overview of the Code and Regulations	p. 43
The "Substantial Economic Effect" Test	p. 44
Introduction	p. 44
Capital Accounts	p. 45
The "Simple" Capital-Account Test for Substantial Economic Effect: Orrisch v. Commissioner	p. 49
The "Substantial Economic Effect" Regulations	p. 52
Determining "Economic Effect" When Capital-Account Deficits Need Not Be Repaid	p. 53
The "Substantiality" Rules	p. 56
Some Special Problems	p. 59
Depreciation	p. 59
Deductions Attributable to Nonrecourse Debt	p. 63
Interaction of Nonrecourse Deductions with the Alternate Test for Economic Effect	p. 68
Allocating Credits	p. 70
Comparison with Subchapter S	p. 70
Allocations Attributable to Contributed Property: Section 704(c)	p. 71
Allocations of Gain or Loss	p. 71
Allocations of Depreciation	p. 75
The Traditional Method	p. 75
The Traditional Method with Curative Allocations	p. 77
The Remedial Allocation Method	p. 80
"Reverse [section]704(c) Allocations" Under Section 704(b)	p. 83
Distributions of Section 704(c) Property	p. 84
Distributions of Property to a Partner Who Has Contributed Section 704(c) Assets	p. 85
Transfer of Interests: Section 704(c)(1)(C)	p. 87
Comparison with Subchapter S	p. 88
Partnership Allocations: Assignment-of-Income Problems	p. 89
Family Partnerships	p. 89
Last-Minute Partners: Section 706(d)	p. 92
Assignments of Income Not Dealt with by Specific code Provisions: The Anti-Abuse Regulations	p. 93
Comparison with Subchapter S	p. 97
Allocation of Partnership Debt	p. 99
Introduction	p. 99
What is a Partnership Liability Under [section] 752?	p. 99
The Definition of Recourse and Nonrecourse Debt	p. 100
Introduction	p. 100
Economic Risk of Loss and Constructive Liquidation	p. 101
Allocation of Recourse Liability	p. 103
In General	p. 103
Effect of Guarantees and Indemnifications of Recourse Debt	p. 106
Contributions of Property Encumbered by Recourse Debt	p. 107
Allocation of Nonrecourse Liability	p. 108
The First Tier of Nonrecourse Debt Allocation	p. 108
Sufficient Basis for Nonrecourse Deductions	p. 108
Refinancing	p. 109
The Second Tier of Nonrecourse Debt Allocation	p. 110
The Third Tier of Nonrecourse Debt Allocation	p. 111
Effects of Guarantees of Nonrecourse Debt	p. 113
Obligations That are not "Liabilities" Under [section] 752	p. 114
Transactions between Partnerships and Their Partners	p. 119
Income-Related Payments: Distributive Shares and Section 707(a) Payments	p. 121
Fixed Payments: Guaranteed Payments and Section 707(a) Payments	p. 124
Determining Whether A "Partner Capacity" Payment is a Distributive Share or a Guaranteed Payment	p. 125
Minimum Payments	p. 125
Payments Measured by a Partnership's Gross Income	p. 128
Some Other Aspects of Transactions Between Partners and Partnerships	p. 129
Comparison with Subchapter S	p. 129
Sales of Partnership Interests	p. 131
Taxation of the Seller	p. 131
The Seller's Amount Realized	p. 131
Section 751(a)	p. 132
Taxation of Look-through Gains under Section 1(h)	p. 136
The Buyer's Outside and Inside Bases	p. 138
The Buyer's Outside Basis	p. 138
Inside Basis Adjustments under Section 743(b)	p. 138
Determining the Transferee's Share of Inside Basis	p. 139
Allocating [section] 743(b) Adjustments to Particular Assets	p. 142
Using the [section] 743(b) Adjustment	p. 146
The Section 754 Election	p. 147
Basis Adjustments under Section 732(d)	p. 148
Collateral Effects of a Sale of a Partnership Interest	p. 149
Comparison with Subchapter S	p. 150
Calculating Gain on the Sale of Stock	p. 150
Character of Gain and Inside Basis Adjustments upon Transfers of Interests	p. 150
Termination by Sale	p. 152
Partnership Distributions: An Introduction	p. 153
The General Principle of Nonrecognition	p. 154
Cases in Which Gain or Loss is Recognized	p. 160
Gain Recognition	p. 160
Liquidating Distributions on Which Loss Is Recognized	p. 162
"De Minimis" Distributions of Property	p. 164
Distributions of Section 704(c) Property	p. 165
Distributions Taxed under Section 737	p. 165
Tax Treatment of the Partnership	p. 167
Comparison with Subchapter S	p. 167
Distributions Subject to Section 751(b)	p. 169
Liquidating Distributions of Assets Other Than Section 751 Assets	p. 172
Liquidating Distributions of Section 751 Property	p. 177
Section 751(b) and Current Distributions	p. 179
The Scope of Section 751(b): An Example	p. 181
Comparison with Subchapter S	p. 183
Payments to Retiring Partners: Section 736 and Related Problems	p. 185
Introduction	p. 185
Interpreting Section 736-In General	p. 187
Payments by Service Partnerships to General Partners	p. 188
How Section 736 Payments are Taxed	p. 192
Examples	p. 194
Some Complications	p. 197
The Relationship between Section 736 and Section 751(b)	p. 197
A Refinement in the Definition of Section 736(a) Payments	p. 198
Liquidation of an Entire Partnership	p. 199
Sales and Retirement Payments Distinguished	p. 200
Problems of "Form" and "Substance"	p. 203
Comparison with Subchapter S	p. 204
Basis Adjustments under Section 734	p. 205
Adjustments Under Section 734	p. 206
Distributions That Change the Basis of Property	p. 206
Distributions on Which Gain or Loss Is Recognized	p. 208
Allocating the Adjustment to Particular Assets	p. 210
Section 734 and Anti-Abuse Rules	p. 212
Comparison with Subchapter S	p. 214
The Death of a Partner	p. 215
Income in Respect of a Deceased Partner	p. 215
Introduction	p. 215
The Basis of an Inherited Partnership Interest	p. 216
Closing the Partnership's Taxable Year Upon the Death of a Partner	p. 221
Sale or Liquidation of a Deceased Partner's Interest	p. 221
Comparison with Subchapter S	p. 222
What is a Partnership?	p. 225
Partnership vs. Cost-Sharing and Employment Arrangements	p. 226
Partnership vs. Co-Ownership of Property	p. 227
Partnership vs. Corporation	p. 230
Publicly Traded Partnerships	p. 233
Electing Large Partnerships	p. 234
Table of Cases	p. 237
Table of Internal Revenue Code Sections	p. 239
Table of Treasury Regulations and Rulings	p. 242
Index	p. 245
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