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754 and Basis Adjustments for and LLC Interests

Presenting a live 110 minute teleconference with interactive Q&ASection 754 and Basis Adjustments for Partnership and LLC Interestsfor Partnership and LLC InterestsNavigating Complexities in Federal Tax Treatment of Distributions and Sales of Interests1pm Eastern | 12pm Central | 11am Mountain | 10am PacificTUESDAY, SEPTEMBER 13, 2011 Today s faculty features:1pm Eastern | 12pm Central | 11am Mountain | 10am PacificJanice Eiseman Principal Cummings & Lockwood Stamford ConnJanice Eiseman, Principal, Cummings & Lockwood, Stamford, Taylor, Director, Carruthers & Roth, Greensboro, Gerson, Principal, National Tax Services, PricewaterhouseCoopers, Washington, this program, attendees mustlisten to the audio over the refer to the instructions emailed to the registrant for th

Sep 13, 2011 · • In effect for all future tax years of the partnership unless In effect for all future tax years of the partnership, unless revoked. • Revocation requires a special application to the IRS and will be grantedlfh b lh hbd only if there are substantial changes to the business or assets of the partners. Sect. 1.754

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Transcription of 754 and Basis Adjustments for and LLC Interests

1 Presenting a live 110 minute teleconference with interactive Q&ASection 754 and Basis Adjustments for Partnership and LLC Interestsfor Partnership and LLC InterestsNavigating Complexities in Federal Tax Treatment of Distributions and Sales of Interests1pm Eastern | 12pm Central | 11am Mountain | 10am PacificTUESDAY, SEPTEMBER 13, 2011 Today s faculty features:1pm Eastern | 12pm Central | 11am Mountain | 10am PacificJanice Eiseman Principal Cummings & Lockwood Stamford ConnJanice Eiseman, Principal, Cummings & Lockwood, Stamford, Taylor, Director, Carruthers & Roth, Greensboro, Gerson, Principal, National Tax Services, PricewaterhouseCoopers, Washington, this program, attendees mustlisten to the audio over the refer to the instructions emailed to the registrant for the dial-in can still view the presentation slides online.

2 If you have any questions, pleasecontactCustomer Service at1-800-926-7926 ext. MaterialsIf you have not printed the conference materials for this program, please complete the following steps: Click on the + sign next to Conference Materials in the middle of the left-hand column on your screen hand column on your screen. Click on the tab labeled Handouts that appears, and there you will see a PDF of the slides for today's program. Double click on the PDF and a separate page will open. Double click on the PDF and a separate page will open.

3 Print the slides by clicking on the printer Education CreditsFOR LIVE EVENT ONLYA ttendees must listen to the audio over the telephone. Attendees can still view the presentation slides online but there is no online audio for this program. Please refer to the instructions emailed to the registrant for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 18009267926 ext. for Optimal QualitySd QlitSound QualityFor this program, you must listen via the telephone by dialing 1-866-873-1442 and entering your PIN when prompted.

4 There will be no sound over the web ect o .If you dialed in and have any difficulties during the call, press *0 for assistance. Yo u m a y a l s o send us a chator e-mail so we can address the QualityTo maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key againpress the F11 key d Bi Adj tt f Section 754 and Basis Adjustments for Partnership and LLC Interests SeminarSept. 13, 2011 Craig Taylor, Carruthers & Eiseman, Cummings & Gerson, PricewaterhouseCoopers d ay s ProgramIntroduction To Key Concepts[Janice Eiseman]Slide 7 Slide 11 Sect.

5 754 Elections[Craig Taylor]Slide 12 Slide 19 Sect. 743(b) Adjustments On Transfer Of Partnership Interests [Janice Eiseman]Slide 20 Slide 37 Sect. 734(b) Adjustments On Distributions From Partnerships[Craig Taylor]Slide 38 Slide 50 Collected Issues And Nuances Of Partnership Basis Adjustments [Craig Gerson]Slide 51 Slide 70 INTRODUCTION TO KEY Janice Eiseman, Cummings & LockwoodINTRODUCTION TO KEY CONCEPTSPARTNERSHIP Basis : INSIDE AND OUTSIDE K: In parts of Subchapter K, the subchapter governing the taxation of hidhi idihi h i di ipartnerships and partners, a partnership is treated as a separate entity, which is distinct from its partners.

6 In other parts of Subchapter K, a partnership is treated as an aggregateof individuals, each of whom owns an undivided interest in partnership Basis : Outside Basis refers to a partner s tax Basis in the partnership interest itself. The partnership is treated as an entityseparate from its partners and the partnership interest as an intangible asset that is separate and distinct from partnership assets. This is similar to a shareholder s tax Basis in a share of Basis : Inside Basis refers to the partner s share of the Basis in the assets held by the partnership.

7 Because the partnership is not a separate taxable entity, its income is allocated and taxed to its partners treating them like owners of undivided Interests in theallocated and taxed to its partners, treating them like owners of undivided Interests in the assets and business of the partnership, , as an aggregateof individuals. This does not have a direct analog in the Subchapter C or Subchapter S world, because corporations are treated as separate entities. Cummings & Lockwood LLC 201188 PARTNERSHIP Basis : INSIDE AND OUTSIDE BASISO verview (Cont )Overview (Cont.)

8 754 election: Purpose of making a Sect. 754 election is to equalize the outside Basis and the inside Basis , to the extent allowed. A Sect. 754 election activates both Sect. 743(b), which applies to certain transfers of partnership Interests , and Sect. 734(b), which applies to certain distributions ofcertain transfers of partnership Interests , and Sect. 734(b), which applies to certain distributions of property by the partnership to a partner. a Sect. 754 election is notmade, there is no change to the inside Basis of partnership assets; that is, there is no adjustment to a transferee s inside Basis no adjustment to the tax Basis of partnership assets because of a distribution of property by the partnership to a partner.

9 For example, (a), which treats the partnership as an entity, provides that the Basis of partnership property is notadjusted as a result of a sale, or exchange, or the death of a partner unless an election has been made under Sect. 754 or unless the partnership has a substantial built-in loss. If S t 754 l tiid thS t 743(b) itiA S t 743(b) dj tt If a Sect. 754 election is made, then Sect. 743(b) is operative. A Sect. 743(b) adjustment implements an aggregate approach by adjusting the tax consequences allocable to a transferee partner so as to provide the transferee with an approximation of a cost Basis in an undivided interest in the partnership property.

10 The legislative history of the 1954 Code states that the purpose of Sect. 743(b) is to ensure that a transferee s distributive share of income, pp(),gain, loss, deduction or credit is the same as though the partnership had dissolved and been reformed, with the transferee of the interest a member of the partnership. Rep. No. 1337, 83rd Cong., 2d Sess. 70 (1954). In other words, the function of a Sect. 743(b) adjustment is to offset gain or loss that accrued prior to the transferee becoming a partner. 2 Aihhibidjhfh dji di d d S Cummings & Lockwood LLC that there is a Basis adjustment, the amountof the adjustment is determined under Sect.


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