Partnership Distribution Rules and Exceptions: Key Issues for Tax Counsel, Planning Strategies to Minimize Liability

Partnership distributions and sales of partnership interest can result in significant tax liability. Tax professionals must be able to navigate complex tax rules in order to identify key issues and implement strategies to minimize tax liability when structuring partnerships and related transactions.

Under Sec. 731(a), owners of an entity treated as a partnership for tax purposes do not recognize taxable gain or loss on a distribution unless the distribution exceeds their outside basis in the partnership interest. The same applies under Sec. 731(b) whereas the partnership does not recognize taxable gain or loss on distributions made to owners. However, both provisions are subject to certain exceptions that tax professionals must understand along with the potential implications regarding tax basis under Sec. 732.

Tax practitioners advising both the partnership making distributions and the owners receiving the distributions must implement methods to minimize the tax consequences of these transactions.

Listen as our panel discusses certain types of partnership distributions and related tax rules, exceptions to the nonrecognition rules, issues stemming from guaranteed payments, disguised sales, and other challenges.

1. Tax rules applicable to partnership distributions
2. Navigating exceptions to the nonrecognition rules
   1. Guaranteed payments
   2. Distributions involving the "mixing bowl" rules
   3. Disguised sales
3. Tax issues for liquidating distributions of cash or property
4. Determining tax basis
5. Best practices for counsel and taxpayers to minimize tax liability

The panel will discuss these and other key issues:

• Tax treatment of the distribution to the partnership and any partners
• General nonrecognition rules and exceptions
• Potential tax implications of liquidating distributions of cash and property
• Determining tax basis
• Best practices for counsel and taxpayers to minimize tax liability

Learning Objectives

After completing this course, you will be able to:

• Understand the tax treatment of distributions for partnerships, LLCs, and any partners
• Recognize issues stemming from the nonrecognition rules and exceptions
• Identify tax implications of distributions of cash and property
• Ascertain key factors in determining tax basis stemming from distributions

• 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 income tax forms and schedules for partnerships and pass throughs; supervisory authority over other preparers/accountants. Knowledge and understanding of partnership structures, dissolution and related taxation; Familiarity with sale and redemption of a departing partners interest, characterizing gain and loss determined upon a transfer, and the 1031 Like-Kind Exchange rules

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).