Partnership Tax Planning Issues When Raising Capital and Exchanging Debt for Equity
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Tax Law
- event Date
Tuesday, March 4, 2025
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- 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).
This CLE/CPE webinar will provide tax counsel and advisers with advanced guidance on navigating partnership tax planning issues when raising capital and exchanging debt for equity. The panelist will discuss critical tax considerations in issuing new equity in exchange for funding and tax consequences of debt for equity under current tax law and offer essential planning techniques to avoid tax pitfalls.
Mr. Walch is a member of the firm's Tax and Estate Planning section. He has over 30 years of experience advising clients with complex tax planning and business structuring. He has considerable experience in minimizing taxes through the use of pass-through and other business entities, both domestically and internationally. Mr. Walch also frequently structures real estate and corporate transactions, including advising clients on the purchase of New York City's largest undeveloped property.
Mr. Walch regularly advises clients on business dealings and tax planning involving Native American nations, and is a frequent national and local speaker on Indian law and tax topics. He represents taxpayers in tax compliance and litigation matters, including representation in the U.S. Tax Court and state tax agencies.
Private companies structured as partnerships must navigate complicated tax rules when faced with recapitalization. Tax counsel and advisers representing private investment funds and operating company partnerships must recognize the tax implications of changes in entity structure and exchanging debt for equity, along with strict rules regarding allocations for income tax purposes.
Generally, IRC Sec. 704 requires that allocations for income tax purposes must meet the substantial economic effect standard and be made in accordance with the partner's interest in the partnership. This also means that the partnership must adhere to strict capital account maintenance rules when analyzing potential tax consequences of equity infusions when a partnership's value has shifted.
New equity issued in exchange for funding may bring about various layers of complexity depending on whether it's a new partnership versus a partnership that's already operating. Any partner contributing an asset with a value that differs from its tax basis requires an analysis of Sec. 704(c), which should be negotiated carefully between the contributing partner and other partners due to the significant impact it has on taxable income.
Exchanging debt for equity also raises various tax implications that may change the liability allocation, minimum gain tracking, taxable income, and other key tax items. Counsel and advisers must be vigilant in evaluating debt and equity transactions in order to avoid or minimize tax liability.
Listen as Michael Walch, Shareholder at KIRTON MCCONKIE, discusses critical tax considerations in issuing new equity in exchange for funding and tax consequences of debt for equity under current tax law and offers essential planning techniques to avoid tax pitfalls.
- Overview of applicable partnership tax rules
- Raising capital and navigating changes in equity structure
- Debt for equity transactions
- Best practices and pitfalls to avoid for tax counsel and advisers
The panelist will discuss these and other key issues:
- What are the tax implications of new equity in exchange for funding transactions under the tax code?
- What tax issues arise in debt for equity transactions?
- What are the tax challenges and pitfalls to avoid when acquiring equity in partnerships already operating?
- What are the key areas of focus for minimizing or avoiding adverse tax consequences stemming from partnership allocations?
Learning Objectives
After completing this course, you will be able to:
- Determine the best structure for raising capital and debt for equity transactions under current tax law
- Recognize various factors in tax planning when structuring debt for equity transactions
- Identify key tax provisions under current tax law impacting partnership entities
- Ascertain tax planning methods to avoid tax pitfalls in structuring transactions to raise capital
- 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 preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.
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).
