Surgent's Max the Tax: Section 754

Overview

Two firms need expert help with Section 754, and game participants are just the right people to assist. First, partners at LMN, LLP are considering electing Section 754. They need to understand key aspects of the process and want to ensure the best outcome to their basis in partnership property and interest. Participants must then leverage their knowledge and calculate the adjusted basis balance sheet for another firm that already elected Section 754.

Prerequisites

A basic understanding of the tax rules impacting individuals and pass-through entities

Objectives

• Determine the amount of a Section 754 basis step-up
• Know how to allocate the basis step-up to the partnership's assets
• Know how a partnership makes a Section 754 election and reports it to the IRS

Highlights

• How and why a partnership makes a 754 election
• The effect of the 754 election when an interest in a partnership is sold or inherited
• How the 754 election applies when a partnership makes a distribution of property to one or more of its partners
• How to make the 754 basis adjustment