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Partnership Taxation

Partnership Taxation

Author(s): Ryan Pace

Edition: 3

Copyright: 2019

Pages: 264

Edition: 3

Copyright: 2019

Pages: 264

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Understanding the taxation of partnerships and partners is a critical component of successful tax consulting. The popularity of limited liability companies as the most common entity-of-choice for new businesses requires tax consultants to have a strong handle on Subchapter K of the Internal Revenue Code.

Partnership Taxation addresses important issues regarding the formation, operation, and liquidation of entities taxed as partnerships, including general partnerships, limited partnerships, LLPs, LLLPs, and LLCs. In particular, this text covers topics such as contributing property and services to a partnership, determining a partner's tax basis in the partnership, selecting a partnership's taxable year, computing a partnership's taxable income, identifying separately-stated items, understanding the substantial economic effect requirement, handling nonliquidating and liquidating distributions, selling partnership interests, among other topics.

This text includes review problems at the end of each chapter to strengthen the reader's understanding of important concepts and the application of the law to particular transactions. Selected court cases are also included so that the reader has opportunity to study a court's analysis of particular issues involving partnerships. Ultimately, after studying this text, the reader should have a valuable understanding of the taxation of partnerships and partners.

About the Author

PART I PARTNERSHIP FORMATION
Chapter 1 Selecting a Business Entity
 A. Sole Proprietorship
 B. General Partnership
 C. Limited Partnership
 D. Limited Liability Partnership
 E. Limited Liability Limited Partnership
 F. Limited Liability Company
 G. Corporation
 H. Tax Treatment of Business Entities under the Check-the-Box Regulations
 I. Qualified Joint Ventures between Married Persons
 J. Obtaining an Employer Identification Number (EIN)

Chapter 2 Transfer of Property to a Partnership
 A. Nonrecognition of Gain or Loss
 B. Partner’s Initial Tax Basis in Partnership Interest
 C. Partner’s Holding Period in Partnership Interest
 D. Partnership’s Initial Tax Basis in Partnership Assets
 E. Special Rules Relating to Character of Property Contributed
 F. Partnership’s Holding Period in Partnership Assets
 G. A Partner’s Capital Account
 H. Contribution of Depreciable Assets
 I. Exception to Nonrecognition: “Investment Companies”
 J. Partnership Formation Example

Chapter 3 Transfer of Services to a Partnership
 A. Performing Services in Return for Property in General
 B. Performing Services in Return for an Interest
in the Partnership
1 . Tax Treatment to the Partner
2 . Tax Treatment to the Partnership
3 . Examples
 C. Special Rule Relating to Substantially Nonvested Profits Interests Received by a Partner in Return for the Performance of Services

Chapter 4 Other Partnership Formation Issues
 A. Taxable Year
 B. Method of Accounting
 C. Costs Related to Partnership Formation
 D. Electing Out of Subchapter K

PART II PARTNERSHIP OPERATIONS  
Chapter 5 Ordinary Business Income and Loss, Separately Stated Items, and Adjustments to Outside Basis
 A. Pass-Through Nature of a Partnership
 B. Partnership Ordinary Business Income
 C. Separately Stated Items
 D. Nature of Partnership Reporting (IRS Form 1065)
 E. Adjustments to a Partner’s Outside Basis Due to Partnership Operations (Excluding Liabilities)
 F. Example
 G. Adjustments to a Partner’s Outside Basis Due to Partnership Liabilities
 H. Partnership Interest Created by Gift

Chapter 6 Limitations on Partnership Losses Deductible by Partners
 A. Outside Basis Limitation
 B. At-Risk Loss Limitation
 C. Passive Loss Limitation

Chapter 7 Guaranteed Payments and Other Nondistribution Transactions between Partners and the Partnership
 A. Guaranteed Payments
 B. Other Nondistribution Transactions between Partners and the Partnership

Chapter 8 Allocations Attributable to Built-in Gain or Loss Property  
 A. General Rule Relating to Allocation of Profits and Losses
 B. Regulatory Allocations Applicable to Pre-contribution Gain or Loss
 C. Example

Chapter 9 Special Allocations, Substantial Economic Effect, and Nonrecourse Deductions
 A. General Rule Relating to Allocation of Profits and Losses
 B. Substantial Economic Effect
 C. Evolution of “Targeted” Allocations
 D. Nonrecourse Deductions

PART III DISTRIBUTIONS FROM A PARTNERSHIP TO A PARTNER
Chapter 10 Nonliquidating and Liquidating Distributions
 A. Nonliquidating Distributions
 B. Liquidating Distributions
 C. Death or Retirement of a Partner

Chapter 11 Disproportionate Distributions, Disguised Sales, and Other Distribution Issues
 A. Disproportionate Distributions
 B. Disguised Sales
 C. Distributions of Contributed Property
 D. Optional Basis Adjustments to Partnership Assets (Section 754 Election)

PART IV SALE OF A PARTNERSHIP INTEREST AND PARTNERSHIP TERMINATIONS
Chapter 12 Sale of a Partnership Interest
 A. Gain or Loss Recognition
 B. Exception for “Hot” Assets
 C. Buyer’s Initial Outside Basis
 D. Optional Basis Adjustment to Partnership Assets (Section 754 Election)

Chapter 13 Partnership Terminations, Mergers, and Divisions
A. Partnership Terminations in General
B. Partnership Mergers
C. Partnership Divisions

PART V Miscellaneous Partnership Tax Topics  
Chapter 14 Miscellaneous Partnership Tax Topics
 A. Carried Interests
 B. Reportable Transactions and Material Advisors
 C. Anti-abuse Rules
 D. Qualified Business Income Deduction

Index

Ryan Pace
Ryan H. Pace, M.Tax, J.D., LL.M., is a professor of taxation at Weber State University. He teaches graduate and undergraduate courses in taxation and business law. Mr. Pace also serves as the Director of the Master of Accounting program, the Master of Taxation program, and the Center for Tax Education & Research at Weber State. Prior to his teaching career, Mr. Pace was a full-time attorney in Arizona and Utah. Mr. Pace graduated from New York University with a Master of Laws degree in taxation after receiving his Juris Doctor with honors from Washburn University School of Law. He also received a Master of Taxation degree from Arizona State University and his Bachelor of Science degree from the University of Utah. Mr. Pace has written several articles in the area of taxation and participated in many continuing education programs and academic conferences.

Understanding the taxation of partnerships and partners is a critical component of successful tax consulting. The popularity of limited liability companies as the most common entity-of-choice for new businesses requires tax consultants to have a strong handle on Subchapter K of the Internal Revenue Code.

Partnership Taxation addresses important issues regarding the formation, operation, and liquidation of entities taxed as partnerships, including general partnerships, limited partnerships, LLPs, LLLPs, and LLCs. In particular, this text covers topics such as contributing property and services to a partnership, determining a partner's tax basis in the partnership, selecting a partnership's taxable year, computing a partnership's taxable income, identifying separately-stated items, understanding the substantial economic effect requirement, handling nonliquidating and liquidating distributions, selling partnership interests, among other topics.

This text includes review problems at the end of each chapter to strengthen the reader's understanding of important concepts and the application of the law to particular transactions. Selected court cases are also included so that the reader has opportunity to study a court's analysis of particular issues involving partnerships. Ultimately, after studying this text, the reader should have a valuable understanding of the taxation of partnerships and partners.

About the Author

PART I PARTNERSHIP FORMATION
Chapter 1 Selecting a Business Entity
 A. Sole Proprietorship
 B. General Partnership
 C. Limited Partnership
 D. Limited Liability Partnership
 E. Limited Liability Limited Partnership
 F. Limited Liability Company
 G. Corporation
 H. Tax Treatment of Business Entities under the Check-the-Box Regulations
 I. Qualified Joint Ventures between Married Persons
 J. Obtaining an Employer Identification Number (EIN)

Chapter 2 Transfer of Property to a Partnership
 A. Nonrecognition of Gain or Loss
 B. Partner’s Initial Tax Basis in Partnership Interest
 C. Partner’s Holding Period in Partnership Interest
 D. Partnership’s Initial Tax Basis in Partnership Assets
 E. Special Rules Relating to Character of Property Contributed
 F. Partnership’s Holding Period in Partnership Assets
 G. A Partner’s Capital Account
 H. Contribution of Depreciable Assets
 I. Exception to Nonrecognition: “Investment Companies”
 J. Partnership Formation Example

Chapter 3 Transfer of Services to a Partnership
 A. Performing Services in Return for Property in General
 B. Performing Services in Return for an Interest
in the Partnership
1 . Tax Treatment to the Partner
2 . Tax Treatment to the Partnership
3 . Examples
 C. Special Rule Relating to Substantially Nonvested Profits Interests Received by a Partner in Return for the Performance of Services

Chapter 4 Other Partnership Formation Issues
 A. Taxable Year
 B. Method of Accounting
 C. Costs Related to Partnership Formation
 D. Electing Out of Subchapter K

PART II PARTNERSHIP OPERATIONS  
Chapter 5 Ordinary Business Income and Loss, Separately Stated Items, and Adjustments to Outside Basis
 A. Pass-Through Nature of a Partnership
 B. Partnership Ordinary Business Income
 C. Separately Stated Items
 D. Nature of Partnership Reporting (IRS Form 1065)
 E. Adjustments to a Partner’s Outside Basis Due to Partnership Operations (Excluding Liabilities)
 F. Example
 G. Adjustments to a Partner’s Outside Basis Due to Partnership Liabilities
 H. Partnership Interest Created by Gift

Chapter 6 Limitations on Partnership Losses Deductible by Partners
 A. Outside Basis Limitation
 B. At-Risk Loss Limitation
 C. Passive Loss Limitation

Chapter 7 Guaranteed Payments and Other Nondistribution Transactions between Partners and the Partnership
 A. Guaranteed Payments
 B. Other Nondistribution Transactions between Partners and the Partnership

Chapter 8 Allocations Attributable to Built-in Gain or Loss Property  
 A. General Rule Relating to Allocation of Profits and Losses
 B. Regulatory Allocations Applicable to Pre-contribution Gain or Loss
 C. Example

Chapter 9 Special Allocations, Substantial Economic Effect, and Nonrecourse Deductions
 A. General Rule Relating to Allocation of Profits and Losses
 B. Substantial Economic Effect
 C. Evolution of “Targeted” Allocations
 D. Nonrecourse Deductions

PART III DISTRIBUTIONS FROM A PARTNERSHIP TO A PARTNER
Chapter 10 Nonliquidating and Liquidating Distributions
 A. Nonliquidating Distributions
 B. Liquidating Distributions
 C. Death or Retirement of a Partner

Chapter 11 Disproportionate Distributions, Disguised Sales, and Other Distribution Issues
 A. Disproportionate Distributions
 B. Disguised Sales
 C. Distributions of Contributed Property
 D. Optional Basis Adjustments to Partnership Assets (Section 754 Election)

PART IV SALE OF A PARTNERSHIP INTEREST AND PARTNERSHIP TERMINATIONS
Chapter 12 Sale of a Partnership Interest
 A. Gain or Loss Recognition
 B. Exception for “Hot” Assets
 C. Buyer’s Initial Outside Basis
 D. Optional Basis Adjustment to Partnership Assets (Section 754 Election)

Chapter 13 Partnership Terminations, Mergers, and Divisions
A. Partnership Terminations in General
B. Partnership Mergers
C. Partnership Divisions

PART V Miscellaneous Partnership Tax Topics  
Chapter 14 Miscellaneous Partnership Tax Topics
 A. Carried Interests
 B. Reportable Transactions and Material Advisors
 C. Anti-abuse Rules
 D. Qualified Business Income Deduction

Index

Ryan Pace
Ryan Pace
Ryan H. Pace, M.Tax, J.D., LL.M., is a professor of taxation at Weber State University. He teaches graduate and undergraduate courses in taxation and business law. Mr. Pace also serves as the Director of the Master of Accounting program, the Master of Taxation program, and the Center for Tax Education & Research at Weber State. Prior to his teaching career, Mr. Pace was a full-time attorney in Arizona and Utah. Mr. Pace graduated from New York University with a Master of Laws degree in taxation after receiving his Juris Doctor with honors from Washburn University School of Law. He also received a Master of Taxation degree from Arizona State University and his Bachelor of Science degree from the University of Utah. Mr. Pace has written several articles in the area of taxation and participated in many continuing education programs and academic conferences.