Surgent's Understanding Partnership Taxation: Debt Allocations

Overview

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.

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