DESCRIPTION
This module covers the various partnership and LLC capital accounts, namely 704(b) book and tax capital accounts. We discuss the purpose of each capital account, look at changes to the various accounts, and discuss how tax allocations generally follow 704(b) book allocations (the “tax follows book” concept). We also discuss how a partner’s basis (both inside and outside basis) differs from their tax capital accounts.
LEARNING OBJECTIVES
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Analyze the difference between 704(b) book capital and tax capital
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Discuss the “tax follows book” concept
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Analyze the difference between outside basis and tax capital

