Interpreting Partnership Agreements and Reporting Terms on Form 1065

A critical but often-overlooked component of preparing a partnership tax return is a review of the partnership operating agreement. The tendency is to review the partnership documents when setting up a 1065 client but not consult with them during the return preparation. However, continuing review of partnership operating documents is essential to both tax planning and compliance functions for partnership advisers.

There are several aspects of any partnership agreement that tax advisers must review as part of the compliance process. In addition to verifying that items of gain and loss are properly allocated, advisers should also be able to identify ambiguous or conflicting terms in the operating documents.

Advisers should also recognize issues in relating the return back to the operating documents in sufficient time to recommend retroactive changes allowed by Section 761(c).

Partnership operating agreements are not always clearly drafted, and compliance advisers will encounter situations even in boilerplate documents that are difficult to interpret and report on a Form 1065 and accompanying schedules.

Listen as our experienced panel provides a thorough and practical guide to interpreting and applying partnership agreement terms onto tax returns, identifying ambiguous terms, and recognizing planning opportunities.

1. Common terms in partnership agreements that lead to ambiguity
2. Reviewing partnership agreement to identify conflicting or contradictory terms
3. Section 761(c) retroactive modifications
4. Reconciling partnership agreement terms to tax return

The panel will discuss these and other important topics:

• Recognizing ambiguous terms in partnership operating agreements
• Reconciling allocation provisions in agreement with the tax return
• Applying operating agreement as a whole to identify conflicting or contradictory terms
• Recognizing terms in the partnership agreement that might lead to a retroactive change under Sectino 761(c)

Learning Objectives

After completing this course, you will be able to:

• Identify ambiguities in partnership operating agreements from a compliance standpoint
• Recognize partnership operating agreement terms that are contradictory or run counter to the intent of the partnership
• Discern when a retroactive modification under Section 761(c) is appropriate
• Determine areas where a partnership agreement’s terms do not comport with tax reporting rules and 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: Minimum three years preparing partnership tax returns and completing tax workpapers, including capital account allocations. Minimum one year supervising other preparers' returns. In-depth understanding of IRC Section 704(b) capital account rules, including ability to identify mistakes and situations where corrective action is necessary.

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).