Surgent's Understanding Partnership Taxation: Types of Basis, Contributions, and Distributions

Overview

Calculating partnership basis is one of the most important things that we do as practitioners. However, it is also one of the most confusing. When we use the term "basis," we really could be referring to one of three different things. This course will explore the differences between inside basis, outside basis, and 704(b) basis. Through several examples and practice problems, we will show you how to easily distinguish among these terms. We will also explore the tax implications of initial contributions of property to a partnership as well as the different types of partnership distributions.

Prerequisites

Working knowledge of fundamental partnership tax concepts

Objectives

• Calculate inside basis, outside basis, and 704(b) basis
• Recognize the concept of substantial economic effect
• List the three requirements that need to be present for an allocation to be deemed to have economic effect
• Calculate the reallocation of items of gains and loss under IRC 704(b) when a qualified income offset is present
• Recognize the tax effects of transferring cash, property, and services to a partnership
• Recall the tax effects of contributing assets that are encumbered by debt to a partnership
• List the key rules of thumb to remember when dealing with distributions
• State the ordering rules for calculating a partner’s tax basis
• Describe the key differences between liquidating and non-liquidating distributions
• Determine any applicable tax gains and losses of cash and property distributions
• State the ordering rules for hybrid distributions that involve both cash and property

Highlights

• Three different types of basis
• Contributions of property
• IRC 704(b) – Capital Accounts and Special Allocations
• Contributions of property and debt
• Contributions of services
• IRS Notice 2020-43