In an article published in Tax Notes, Partner Rob Burke
argues that the two most commonly suggested approaches for dealing
with revaluations of the assets and capital accounts of an
upper-tier partnership can produce inappropriate results, and he
suggests an alternative approach. Read the full publication.
Excerpt: Section 704(c)(1)(A) is a seemingly
modest provision. It requires that: "income, gain, loss, and
deduction with respect to property contributed to the partnership
by a partner shall be shared among the partners so as to take
account of the variation between the basis of the property to the
partnership and its fair market value at the time of
contribution."
Over the last three decades, the principles underlying this code
section have slowly but surely wound their way throughout the
entirety of subchapter K. For a provision that for the first 30
years of its existence was entirely elective and applied only to
actual contributions of assets in kind to a partnership, its
principles now apply in a dizzying array of circumstances and are
the subject of multiple additional code provisions, several sets of
final regulations, at least three sets of proposed regulations, and
one set of temporary regulations. Together, these rules present an
intricate mathematical maze that only a few tax advisers who
specialize in subchapter K have any hope of navigating.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.