IRC Section 734 Adjustments: Applying the 754 Election to ...

1 WHO TO CONTACT DURING THE LIVE EVENT For Additional Registrations: -Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Live Program: -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN. IMPORTANT INFORMATION FOR THE LIVE PROGRAM This program is approved for 2 CPE credit hours. To earn credit you must: Participate in the program on your own computer connection (no sharing) if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10).

2 Strafford accepts American Express, Visa, MasterCard, Discover. Listen on-line via your computer speakers. Respond to five prompts during the program plus a single verification code. You will have to write down only the final verification code on the attestation form, which will be emailed to registered attendees. To earn full credit, you must remain connected for the entire program. IRC Section 734 Adjustments: Applying the 754 election to Distributions of partnership property THURSDAY, AUGUST 10, 2017, 1:00-2:50 pm Eastern FOR LIVE PROGRAM ONLY Tips for Optimal Quality Sound Quality When listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection.

3 If the sound quality is not satisfactory, please e-mail immediately so we can address the problem. FOR LIVE PROGRAM ONLY Aug. 10, 2017 IRC Section 734 Adjustments David Patch, Managing Director, National Tax Office partnership Group BDO USA, McLean, Va. Dina A. Wiesen, Senior Manager, National Tax Office, Passthroughs Deloitte Tax, New York Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

4 You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

5 Section 734 Basis Adjustments under Section 734 David Patch BDO USA LLP 5 Section 734 Purpose of the adjustment Computation Making a Section 754 election Mandatory adjustments Allocation of the adjustment Effect on taxable income Special Rules Agenda 6 Section 734 Section 734 vs. 743 partnership A B C D Section 743: Sale or exchange of a partnership interest partnership A B C Section 734: distribution by a partnership Cash or property 7 Section 734 Tax Basis Value Cash 300,000 300,000 Investment 300,000 600,000 600,000 900,000 Partner A 200,000 300,000 Partner B 200,000 300,000 Partner C 200,000 300,000 600,000 900,000 partnership ABC 8 Section 734 Tax Basis Value Cash 300,000 300.

6 000 Investment 300,000 600,000 600,000 900,000 Partner A 200,000 300,000 Partner B 200,000 300,000 Partner C 200,000 300,000 600,000 900,000 partnership ABC distributes $300,000 to Partner A in liquidation of its interest partnership ABC 9 Section 734 Tax Basis Value Investment 300,000 600,000 300,000 600,000 Partner B 200,000 300,000 Partner C 200,000 300,000 400,000 600,000 Tax basis balance sheet is unbalanced partnership ABC 10 Section 734 Tax Basis Value Cash 600,000 600,000 Investment 300,000 600,000 600,000 600,000 Partner B 350,000 300,000 Partner C 350,000 300.

7 000 700,000 600,000 ABC Sells Investment for $600,000 and recognizes $300,000 gain allocated $150,000 to each of B and C increasing their bases to $350,000 partnership ABC 11 Section 734 Tax Basis Value Real Estate 300,000 300,000 Investment 300,000 600,000 600,000 900,000 Partner A 200,000 300,000 Partner B 200,000 300,000 Partner C 200,000 300,000 600,000 900,000 partnership ABC partnership ABC distributes the Real Estate to Partner A in liquidation of its interest 12 Section 734 Tax Basis Value Investment 300,000 600,000 300,000 600,000 Partner B 200,000 300,000 Partner C 200,000 300,000 400,000 600.

8 000 partnership ABC Tax basis balance sheet is unbalanced 13 Section 734 Section 734 If a partnership distributes property (including cash); and either: -A Section 754 is in effect; or -There is a substantial basis reduction Then the partnership 14 Section 734 Section 734 Increase the adjusted basis of partnership property by: -The amount of any gain recognized to the distributee partner under Section 731(a)(1), and -The excess of: The basis of the distributed property to the partnership immediately before the distribution , over The basis of the distributed property to the distributee, as determined under Section 732 15 Section 734 Section 734 Decrease the adjusted basis of partnership property by: -The amount of any loss recognized to the distributee partner under Section 731(a)(2), and -The excess of.

9 The basis of the distributed property to the distributee as determined under Section 732, over The adjusted basis of the distributed property to the partnership immediately before the distribution . 16 Section 734 Section 731 Upon a distribution by a partnership to a partner: -731(a)(1): Gain is recognized by the partner to the extent that any money distributed exceeds the basis of the partner's interest in the partnership -731(a)(2): Loss is recognized if: No property other than money and hot (ordinary income) assets are distributed to such partner, In liquidation of the partner s interest, and Only to the extent that the adjusted basis of such partner's interest in the partnership exceeds the basis assigned to such distributed money and assets 17 Section 734 Section 732 In a NON-liquidating distribution .

10 -The basis of distributed property (other than money) equals its adjusted basis to the partnership immediately before the distribution , -But not in excess of the basis of such partner's interest in the partnership reduced by any money distributed in the same transaction. In a LIQUIDATING distribution : -The basis of distributed property (other than money) equals the adjusted basis of the partner's interest in the partnership reduced by any money distributed in the same transaction. -Basis of hot assets may not be increased 18 Section 734 Tax Basis Value Cash 300,000 300,000 Investment 300,000 600,000 600,000 900,000 Partner A