DESCRIPTION
This module reviews the federal income tax rules governing partnership contributions, with an emphasis on property, services, and liabilities. Participants explore the application of IRC §721, §724, and §737, including the identification of transactions that may trigger gain recognition and character reclassification. The course reinforces these rules through detailed basis calculations involving outside basis, tax basis, and §704(b) capital accounts, including built-in gain and built-in loss property. Interactive exercises, including a contribution drafting activity, are used to evaluate the tax and economic effects of different contribution structures.
LEARNING OBJECTIVES
- Determine whether partner contributions of property, services, or liabilities qualify for nonrecognition treatment under IRC §721.
- Identify transactions involving contributed property that trigger the application of IRC §724 ordinary income recharacterization rules.
- Review the statutory requirements of IRC §737 to determine whether gain recognition is required upon a post-contribution distribution
- Calculate a partner’s outside basis, tax basis, and §704(b) capital account with respect to contributed built-in gain or built-in loss property
- Discuss the tax consequences of contributing services to a partnership, including the impact on §704(b) capital accounts, tax capital, and outside basis
