New IRC 721(c) Regulations and Contributions to Foreign Partnerships
Remedial Allocations and Structuring Transfers to Foreign Partnerships to Ensure Gain Deferral
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Commercial Law
- event Date
Wednesday, September 6, 2017
- schedule Time
1:00 PM E.T.
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
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BARBRI is a NASBA CPE sponsor and this 110-minute webinar is accredited for 2.0 CPE credits.
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BARBRI is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).
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This CLE/CPE course will provide tax counsel with a detailed and practical guide to the rules governing contributions by U.S. persons to “related foreign partnerships,” particularly in the wake of new IRC 721(c) Treasury Regulations, which effectively end non-recognition treatment of partnership contributions if a US person contributes appreciated property to a partnership (US or foreign) in which the US person and related foreign persons own 80 percent or more of the partnership’s interests. The panel will review the specific changes the new regulations make to the previous rules found in Notice 2015-54, and offer guidance on allocation methods on covered contributions.
Ownership of interests in a partnership in which there are “related foreign partners” creates multiple challenges for U.S. taxpayers and their advisers. Besides complex and burdensome reporting requirements, some property transfers and contributions that would be tax-free to a partnership are a taxable event if made to a “section 721(c) partnership. If a US person transfers appreciated property to a US partnership and the partnership qualifies as a “section 721(c) partnership” as defined in the regulations, the transfer generally will not be tax-free (though the partnership may adopt the gain deferral method in which the US person would recognize the built-in gain associated with the property over time).
The IRS recently issued temporary and proposed regulations under Section 721(c) which changed the tax treatment of certain contributions of appreciated property by a US person to a partnership in which the US person and related foreign persons own 80 percent or more of the partnership’s interests. The new regulations generally follow and supersede the prior guidance of Notice 2015-54, with some clarifications.
U.S. taxpayers must recognize pre-contribution gain on certain appreciated property to a partnership with “related foreign partners” unless the partnership adopts the “gain deferral method” for the contributed property. This gain deferral method requires the partnership to use remedial allocations for all built-in gain on the contributed property.
Tax counsel must know the technical requirements of the new rules to avoid adverse tax consequences from partnership contributions. The rules do not apply to all contributions of property to all partnerships, so counsel and advisers must understand how the new regulations fit into the framework of owning foreign partnership interests.
Listen as our expert panel goes into detail on the forthcoming regulations and provides practical suggestions for leveraging the new rules to preserve nonrecognition treatment.
- Default rules on contributions to partnerships
- Treas. Reg. TD 9814, Transfers of Certain Property by U.S. Persons to Partnerships with Related Foreign Partners
- Gain deferral method and remedial allocations
- Structuring contributions to partnerships
- Reporting requirements for property contributions to partnerships
The panel will review these and other key issues:
- What is the default deferral treatment of contributions to partnerships?
- Determining when a property transfer to a partnership requires recognition of built-in appreciation
- Structuring contributions to 721(c) partnerships to apply gain deferral method
- Understanding remedial allocations applied to contributed property
Learning Objectives
After completing this course, you will be able to:
- Identify the default treatment of contributions to partnerships
- Recognize when a partnership qualifies as a “721(c) partnership with related foreign partners”
- Determine when a property contribution may not qualify for Section 721(a) non-recognition treatment
- Discern how and when to use the remedial allocation method to qualify for gain deferral on contributions of 721(c) property
- 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, law or public firm experience at mid-level within the organization, overseeing and structuring U.S. taxpayers' transactions in foreign partnerships; supervisory authority over other attorneys, preparers/accountants. Knowledge and understanding of the default rules for tax treatment of partnership contributions; familiarity with foreign partnership structures
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.
Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).
