DESCRIPTION
This module covers the various partnership and LLC capital accounts, namely the capital accounts maintained on the GAAP book basis, the tax basis, and the more complicated 704(b) book basis. 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). There are two exercises that help the participants internalize the concepts.
LEARNING OBJECTIVES
- Compare the various capital accounts, including introducing the 704(b) Book Capital account.
- Discuss the “tax follows book” concept
- Analyze the difference between basis and tax capital