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Introduction

What you don’t know about partnership taxation can hurt you, and this program focuses on three of the most troublesome issues in partnership tax accounting: (1) partner’s basis versus the capital account and how the tax accounting for each is different, (2) the importance of identifying and tracking pre-contribution gain, and (3) when and how to make an IRC §754 election, and how to account for related adjustments to the basis of partnership property. Richard Bartholomew, CPA, JD, joins William L. Raby, PhD, CPA, and E. Lynn Nichols, CPA, for a three-part discussion based on recent IRS guidance, including the Market Segment Specialization Program Audit Guide (MSSP), “Partnerships.”

Note: Reporting of CPE credit to a CPA’s state board is the responsibility of the CPA. Subscribers to CPE Network Tax or Bisk Audio Tax Report may not receive duplicate credit for this material, which previously aired in the May, June, and July 2004 editions of these programs.

Organization

This text is divided into five chapters.

Chapter 1 focuses on the differences between capital accounts and basis.

Chapter 2 covers tracking and accounting for pre-contribution gain.

Chapter 3 provides an outline of the current major issues relating to IRC §754 elections.

Chapter 4 provides in-depth analysis of: (1) IRS Market Segment Specialization Plan Audit Guide, Partnerships (selected segments); and (2) Proposed Regulations on Partnership's Tax Treatment of Installment Obligations.

Chapter 5 contains review problems.

Program Learning Objectives

Upon completion of this program, the user should:

• Understand the importance of maintaining partners’ fair-market-value capital accounts as required by IRC §704.
• Understand the importance of identifying and tracking pre-contribution gain.
• Understand when and how to make an IRC §754 election, and how to account for IRC §734 and §743 adjustments.

Speakers/Authors