DESCRIPTION
Partnerships can be the simplest returns to prepare, but also the most complicated! One of the areas that adds additional complexities is the built-in gains (BIG) and built-in losses (BIL) from the contribution of non-cash property to the partnership and partnership evaluations. Both of these events can cause the 704(b) and tax capital account to be different, which violates the general rule of “tax follows books”. However, the reasonable methods listed under §704(c) help the partnership rectify these book/tax distortions.
LEARNING OBJECTIVES
- Identify key partnership concepts that can come into conflict with the contribution of property.
- Discuss the three reasonable tax allocation methods for contributed property under 704(c).
- Evaluate tax implications that arise from the three reasonable methods.
- Discuss the implications of a partnership revaluation.
