IRC 732(d) Partnership and LLC Basis Adjustments for Tax Counsel

Determining the tax consequences of the distribution of property by a partnership to a partner is a constant challenge for tax counsel and advisers. Section 754 provides an election allowing a partnership to adjust the basis of its assets when the partnership either distributes property or a partner transfers an interest in the partnership. However, there are instances where partners must make basis adjustments in the distributed property even absent a Section 754 election. This is where the basis rules of Section 732(d) come into play.

Section 732(d) applies when a partnership that has not made a 754 election distributes property to a partner who would be entitled to make a positive 743(b) adjustment to that property if a 754 election were in place. In distributions where Section 732(d) is applicable, the distributed property receives a basis adjustment as if the 743(b) adjustment were in effect.

Section 732(d) and its regulations provide for elective or mandatory basis adjustment, depending on the circumstances. However, the rules can be complex, and the IRS has the option of challenging the adjustment decision on a facts and circumstances basis.

Listen as our experienced panel provides thorough and practical guidance to navigating the basis rules of Section 732(d) in distribution scenarios where a Section 754 election is absent. The webinar will provide tax counsel with valuable tools for structuring operating agreements and distribution provisions to avoid costly tax consequences.

1. Section 732 basis rules
2. Elective 732(d) basis adjustments
3. Mandatory 732(d) adjustments
4. Specific illustrations
   1. Partnership terminations
   2. Nonliquidating distributions with 732(d) adjustment
   3. Liquidating distribution with 732(d) adjustments
5. Structuring issues

The panel will discuss these and other important topics:

• Under what circumstances do the regulations require partnerships to apply Section 732(d) special basis adjustments?
• What are the mechanics for making an elective application of the Section 732(d) basis adjustment?
• What are the rules for basis shifting from longer-lived to shorter-lived property?
• What are the ordering rules for 732(d) basis allocation among multiple distributed properties?

Learning Objectives

After completing this course, you will be able to:

• Identify distribution scenarios in which a Section 732(d) basis adjustment is mandatory
• Determine whether to make an elective Section 732(d) basis adjustment on distributed property
• Allocate basis adjustments among multiple distributed properties
• Recognize the impact of the elections on depreciation when partnership interest or property is distributed or sold

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules, supervising other preparers/accountants. Specific knowledge and understanding of IRS Section 732, including familiarity with basis rules, elective 732(d) basis adjustments, mandatory 732(d) adjustments, as well as liquidating and nonliquidating 732(d) adjustments.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).