IRC Section 754: Partnership and Pass-Through Entity Basis Adjustments

Section 754 is a complex and critical part of the Code for advisers and tax attorneys involved in partnership tax matters. Section 754 sets the framework for an election that allows the partnership to adjust the basis of its assets under certain circumstances. The election provides for a “rebalancing” of partners’ basis in partnership assets and is an integral part of partnership tax practice.

Tax advisers and attorneys must understand not only the rules but also the practical how, why or “why-not” involved in making a Section 754 election. Further, advisers must be prepared to perform the complicated adjustment calculations that the related basis adjustment provisions of Sections 734 and 743 require to track inside basis and depreciation to reach the proper reporting on partners’ individual Schedules K-1.

Listen as our panel of veteran advisers gives you a drill-down on Section 754, sharing their experiences working on complex partnership tax issues to help you understand, identify and avoid missing Section 754 election opportunities. The program will offer concrete examples to illustrate the potential benefits and detriments of a Section 754 election.

1. Section 754 key points
   1. Section 754 overview
   2. Election decision process
      1. Reasons
      2. Evaluating implications
         1. Step-up
         2. Step-down
2. Section 754 election procedures, filing and notification requirements
3. Common computation challenges with Sections 734(b) and 743(b) adjustments
4. Allocations of basis adjustments under Section 755

The panel will review these and other relevant points:

• How to make a Section 754 election, and the practical pros and cons
• How to calculate the inside basis adjustments under Sections 734 and 743
• How to allocate the basis adjustments under Section 755
• How to avoid common basis adjustment mistakes in calculations and reporting

Learning Objectives

After completing this course, you will be able to:

• Identify when to make (and when not to make) a Section 754 election
• Discern the impact of tax reform on determining whether to make a Section 754 election
• Determine the basis adjustments required under various taxpayer circumstances

• 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+ mid-level tax experience preparing complex tax forms and schedules, including supervising other preparers and accountants. Specific knowledge and understanding of partnership taxation, including capital accounts, distributions, exchanges, partnership interests and IRC 754 elections; familiarity with step-up and step-down basis to reflect fair market value and basis adjustments.

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).