Understanding Partnership Taxation: Types of Basis, Contributions, and Distributions

Overview

Calculating partnership basis is one of the most important things that we do as practitioners. However, it is also one of the most confusing. When we use the term “basis,” we really could be referring to one of three different things. This course will explore the differences between inside basis, outside basis, and 704(b) basis. Through several examples and practice problems, we will show you how to easily distinguish among these terms. We will also explore the tax implications of initial contributions of property to a partnership as well as the different types of partnership distributions.

Objectives

Calculate inside basis, outside basis, and 704(b) basis

Recognize the concept of substantial economic effect

List the three requirements that need to be present for an allocation to be deemed to have economic effect

Calculate the reallocation of items of gains and loss under IRC 704(b) when a qualified income offset is present

Recognize the tax effects of transferring cash, property, and services to a partnership

Recall the tax effects of contributing assets that are encumbered by debt to a partnership

List the key rules of thumb to remember when dealing with distributions

State the ordering rules for calculating a partner's tax basis

Describe the key differences between liquidating and non-liquidating distributions

Determine any applicable tax gains and losses of cash and property distributions

State the ordering rules for hybrid distributions that involve both cash and property

Highlights

Three different types of basis

Contributions of property

IRC 704(b) - Capital Accounts and Special Allocations

Contributions of property and debt

Contributions of services

IRS Notice 2020-43

Designed For

Tax practitioners who are looking to improve their knowledge of basis types, the calculation of basis, and the implications of making contributions to a partnership

Prerequisites

Working knowledge of fundamental partnership tax concepts

Preparation

None

Notice

By registering for this program and, accordingly, receiving the eMaterials, you’re acknowledging that you understand both the copyright restrictions on your eMaterials and the CTCPA cancellation policy.

Fees

Credits

Level

Code

Vendor

Fields of Study

Leader(s):

Don Cochran, Nichols Patrick CPE, Inc.

Leader Bios

Don Cochran, Nichols Patrick CPE, Inc.

Don Paul Cochran, JD, CPA, CFP®, Don Cochran is a solo practitioner in Apple Valley, Minnesota. His 34 years of practice has been focused primarily in the areas of small business legal and tax consulting, and individual tax, estate, and financial planning. Don has practiced law in both Iowa and Minnesota. As a co-owner of Nichols Patrick CPE Inc. Don is much sought after as a presenter of CPE for seminars sponsored by state societies of CPAs, CPA firms, and associations of CPAs. He participates in Bisk Education’s nationally syndicated “CPE Network” video tax updates, updates Bisk manuals and is a featured speaker at several national tax conferences. In addition to being an attorney and Certified Public Accountant, he maintains his designations as a Certified Financial Planner®. He is a member of the Minnesota and Iowa State Bar Associations, and the Minnesota Society of CPAs.

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