Umbrella Partnership Structures: Key Tax Considerations for Up-C and UPREITs, Compensation, Tax Agreements

Real estate investment trusts (REITs) and publicly traded partnerships (PTPs) frequently use umbrella partnership structures which allow partnerships to achieve liquidity through rights in certain publicly traded equity. Tax professionals must recognize the critical tax implications of umbrella partnership structures to implement practical tax planning tools for the taxpayer.

In an umbrella partnership C corporation structure (Up-C), an LLC or partnership undertakes a public offering through a newly formed corporation as a holding company that owns an interest in the pass-through entity. This allows the pass-through entity to undertake a public offering without disrupting the tax status of the pass-through entity, where the principal assets and operations remain.

Similarly, in an umbrella partnership real estate investment trust (UPREIT), all property is owned by an operating partnership, with a REIT owning an interest as a partner. Transactions undertaken as an UPREIT can be completed on a tax-deferred basis, since the owner does not acquire publicly-traded stock in the REIT, but instead receives units in the operating partnership.

If structured correctly, an Up-C or UPREIT structure provides tax benefits and exit strategy options for partners with the deferral of taxable gain and the ability to create specific tax attributes. However, tax professionals must recognize critical tax issues such as the allocation of liabilities, limitations under Section 162(m), and other tax considerations for Up-C and UPREIT transactions.

Listen as our panel discusses tax considerations for umbrella partnership structures, the impact of Section 162(m) on compensation paid by partnerships, and methods to ensure flow-through treatment and tax deferral, as well as addresses tax issues for the tax agreements.

1. Overview of umbrella partnership structures
2. Tax issues for umbrella partnership-C corporation (Up-C)
3. Tax issues for umbrella partnership real estate investment trust (UPREIT)
4. Sec. 162(m); compensation paid by partnerships in Up-C and UPREIT

The panel will review these and other key issues:

• What are the key tax considerations for umbrella partnership structures?
• What are the special tax considerations for Up-C and UPREIT structures?
• How does the application of Section 162(m) impact umbrella partnership structures?
• How are tax receivable or tax protection agreements used in these structures?
• How can you ensure flow-through treatment and maintain tax deferrals?

Learning Objectives

After completing this course, you will be able to:

• Identify key tax issues for umbrella partnership structures
• Recognize the direct and indirect tax implications of the 2017 tax reform as applied to umbrella partnership structures
• Determine methods to overcome unique tax challenges of Up-C and UPREIT structures
• Understand how the application of Section 162(m) impacts umbrella partnership structures
• Decide critical issues for tax receivable agreements and tax protection agreements
• Ascertain methods to maintain tax deferrals and flow-through treatment in umbrella partnership structures

• 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 corporations, LLCs and trusts, and taxes related to each.

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).