Tax Aspects of LLC Drafting: Target Allocations; Key Negotiated Tax Terms in JVAs; Top 10 Tax Mistakes When Drafting Agreements

LLC agreement drafting is a must learn topic for many. A key aspect in drafting is the allocation section that includes two alternative approaches. Targeted partnership tax allocations are a popular choice for allocating income and loss among partners. Tax counsel and advisers must guide clients on whether this method will capture all allowed benefits or whether layer cake allocations should be utilized. For example, target allocation agreements may not satisfy regulatory safe harbors but can still meet the economic effect equivalence test or the partners' interest in the partnership test.

The panel will also address certain key points of negotiation when drafting tax provisions in partnership agreements. For example, tax practitioners place particular emphasis on 704(c) methodology, discretion over tax elections and decisions, audit determinations, and tax return preparation.

Lastly, the panel will discuss certain common tax mistakes practitioners make when drafting partnership agreements. Examples include improperly drafting tax boilerplate, omitting important tax provisions, neglecting to address tax return deadlines and review rights, and failures in tax audit language.

Listen as our experienced panel guides you through the LLC drafting process including determining how both targeted and layer cake allocation provisions are drafted and implemented.

1. Targeted versus layer cake allocations
2. Benefits and detriments of targeted allocations
3. Tax allocation drafting best practices
4. Key points of negotiation when drafting tax provisions
5. 10 common drafting errors

The panel will review these and other high priority issues:

• When allocating income and loss among partners, what are the tax benefits of targeted versus layer cake partnership tax allocation methods?
• What are best practices in drafting targeted allocation provisions?
• Which tax provisions deserve special attention during drafting?
• Which tax provisions are commonly overlooked or not properly drafted?

Learning Objectives

After completing this course, you will be able to:

• Distinguish targeted versus regulatory partnership allocations
• Determine the benefits of targeted allocations
• Identify the risks of targeted allocations
• Recognize IRC Section 704(b) requirements

• 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, public or law firm experience at mid-level within the organization, preparing complex tax forms and schedules for partnerships and individual partners; supervisory responsibility over other attorneys/preparers/accountants. Specific knowledge and understanding of IRC 704(b) and partnership structure; familiarity with income and loss allocation among partners, IRC Section 704(b) and the economic effect equivalence test.

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).