Mastering Partnership Minimum Gain Chargeback Provisions for the Tax Professional

Minimum gain chargeback provisions are found in nearly every partnership agreement and LLC operating agreement. Few practitioners fully understand what minimum gain chargebacks require—including many attorneys who draft partnership agreements. Simply stated, a minimum gain chargeback provision is required by law to be included in partnership and LLC agreements to allocate non-recourse deductions in any manner other than on a strict pro-rata basis.

The minimum gain provisions require that partners who have previously received the benefit of non-recourse deductions must have those deductions "charged back" when the asset subject to the non-recourse debt is disposed or if the non-recourse debt has a change in character. There are several notable exceptions to these requirements, and tax practitioners need to know when chargeback provisions apply and when they don't.

Partnerships may also anticipate a chargeback and take steps to avoid the negative tax consequences of a chargeback. Partners may contribute capital to cover their portion of the non-recourse debt, or the partnership may request a waiver of the requirement if the chargeback would lead to unintended economic distortions. By understanding the chargeback provisions, tax advisers can avoid negative tax consequences for clients through proper planning.

Listen as our experienced panelist provides an in-depth, practical guide to the planning and reporting components of minimum gain chargeback provisions, using concrete examples to illustrate how to handle various real life scenarios.

I. Definition of minimum gain and Treas. Reg. 1.704-2(d) provisions

II. Chargeback allocations

III. Ordering rules

IV. Exceptions to chargeback rules

V. Special circumstances

VI. A case study involving calculations

The panelist will discuss these and other critical questions:

• How should a minimum gain chargeback provision look?
• How does a minimum gain chargeback provision operate to allocate previously-claimed non-recourse deductions?
• How do minimum gain chargebacks get reported on tax returns?
• What are common mistakes in reporting chargebacks, and how can they be avoided?
• How does an adviser recognize planning opportunities in avoiding chargebacks?

Learning Objectives

Upon completing this webinar, you will be able to:

• Determine minimum gain chargebacks
• Identify exceptions to the minimum gain chargeback rules
• Ascertain whether a debt or liability is recourse or non-recourse
• Recognize the tax consequences of a non-recourse debt being converted into a recourse debt and vice versa
• Distinguish the treatment of debt and liability under IRC 1001 and IRC 752
• Decide how to allocate chargebacks

• 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 their respective partners and shareholders.

  
  

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).