Understanding Partnership Taxation: Debt Allocations

Overview

You could pay $0 for this course!

This course qualifies for EA/IRS and CFP credit. If you need EA/IRS credit, please contact Tyler Dion (tdion@masscpas.org) after you have registered and provide him your PTIN number.

How debt is allocated to the partners in a partnership is important. It dictates how much money may be taken tax-free as a distribution, the losses that flow down to the partners, and the gain or loss on the sale of a partnership interest. However, the allocation of debt can differ depending on the type of debt it is and the type of partner we are talking about. Furthermore, 704(c) can complicate things. And what in the world is a constructive liquidation scenario? In this course, we will tackle the concept of debt allocations - how you do it, what it means, and why you do it.

This course qualifies for reimbursement through the state’s Workforce Training Express Fund. Firms/companies with fewer than 50 staff can be reimbursed up to 100% of the cost of training and firms/companies with 50-100 employees can be reimbursed up to 50% of the cost of training. You must register for the course and apply for reimbursement through the Workforce Training Express Fund website a minimum of three weeks prior to the start of the course. The course code for this program is C-13020. To learn more, click here or contact Julia Ekelund at jekelund@masscpas.org.

Highlights

Recourse debt allocations Constructive liquidation scenarios Nonrecourse debt allocations Minimum gains and nonrecourse deductions Section 704(c) gains Allocations under 704(c)

Prerequisites

Working knowledge of fundamental partnership tax concepts

Designed For

Tax practitioners who are looking to improve their knowledge of debt allocations and how they affect a partner’s tax basis

Objectives

State how debt allocations affect the calculation of a partner’s basis in the partnership Recognize how recourse and nonrecourse debt are allocated to partners Identify the tax effects of 704(c) on contributed property