Structuring Tiered Partnerships: Advanced Tax Planning Strategies, Avoiding Tax Traps

Tiered partnership arrangements are ownership structures where one pass-through entity, a lower-tier entity, is owned by one or more other taxable entities, an upper-tier entity, allowing limited liability, asset protection, and tax advantages for owners. Despite these advantages, implementing tiered structures involves a careful analysis of complex rules and regulations to avoid unintended tax consequences.

Beyond the planning methods associated with the protection of assets and shielding liability, one of the most complex areas related to tiered partnership arrangements involves the contribution of property. Tiered partnership rules under Sections 704(c) and 743(b) may not yield the expected tax benefits to a taxpayer. For instance, a taxpayer who pays fair market value for a partnership interest with associated Section 704(c) property may not receive the desired tax deduction if the property is subsequently contributed to another partnership. An understanding of structuring methods to work around this issue will avoid this result.

In addition to structuring obstacles relating to the contribution of property and the treatment of allocations and deductions, tax counsel and advisers must consider items provided under tax reform, such as the applicability of the 20 percent pass-through tax deduction. Furthermore, tax advisers should analyze the IRS partnership audit rules allowing a push-out election.

Listen as our panel explains tax rules impacting tiered partnership arrangements, treatment of allocations and deductions in the contribution of property, the impact of tax reform and IRS partnership audit rules, and effective methods to avoid unintended tax consequences to taxpayers.

1. Treatment of allocations and deductions in tiered partnerships
2. Contributions of property and Section 743(b)
3. Obstacles in issuing profits interest and other equity incentives in tiered structures
4. Impact of tax reform and IRS partnership audit rules
5. Effective methods in avoiding tax traps and best practices for tax counsel

The panel will review these and other critical issues:

• Treatment of allocations and deductions under Sections 704(c) and 743(b) for an upper-tier entity
• Potential tax issues associated with the contribution of property to a lower-tier entity
• Tax implications in issuing profits interest and other equity incentives in tiered structures
• The impact of tax reform and IRS partnership audit rules on tiered partnership arrangements
• Tax planning techniques and best practices for tax counsel in structuring tiered partnerships

Learning Objectives

After completing this course, you will be able to:

• Recognize unintended tax consequences that may result when structuring tiered partnerships
• Determine the treatment of allocations and deductions under Sections 704(c) and 743(b) for an upper-tier entity
• Identify potential tax issues with the contribution of property to a lower-tier entity
• Ascertain the impact of tax reform and IRS partnership audit rules on tiered partnership arrangements

• 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; supervisory authority over other preparers/accountants. Specific knowledge and understanding of partnership tax rules, corporate structure, tax treatment of allocations and deductions, and partnership audit regulations.

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).