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Partnerships and Section 704(c)


Gain a better understanding of Section 704(c) provisions and prevent errors and penalties.

Many investors in partnerships, LLCs, and other entities treated as partnerships and their tax advisors struggle with the concepts and the operating rules that apply to Section 704(c). These rules potentially apply whenever property is contributed to such a partnership-treated entity or is distributed from such an entity. The regulations under Section 704(c) provide a very flexible but very complicated set of rules for required allocations that apply to contributions of property and distributions of property from an entity that is treated as a partnership.
This presentation is designed to help the drafters of the basic operating documents for an entity treated as a partnership, including partnership agreements, operating agreements, and trust agreements; the tax return preparers for such entities; and those who structure transactions using such entities, understand and work with the Section 704(c) regulations. Various elections are available to adopt methods of allocation under Section 704(c), as well as information on so-called "reverse allocations." Failing to have a proper understanding of these provisions can potentially result in unanticipated and adverse tax consequences for partners, members, and beneficiaries of partnership-treated entities.



Leo N. Hitt

Leo N. Hitt

Reed Smith LLP

  • Partner in the Pittsburgh office of Reed Smith LLP, a global law firm, in its tax practice and former head of the Tax, Benefits, and Wealth Planning Group
  • Practice emphasizes all aspects of federal income taxation, with particular emphasis on the taxation of business entities, such as partnerships and corporations, securitized and other investment vehicles, including RICs, REITs, and REMICs
  • Conducts seminars and workshops on numerous topics for a large number of professional groups, including lawyers, accountants, and business people
  • Author of several publications related to the areas of the federal income taxation of business entities and other related topics
  • Adjunct professor at the University of Pittsburgh School of Law
  • Listed in Best Lawyers in America for tax law for more than 10 years and achieved the highest rating by Martindale-Hubbell Law Directory
  • Member of the Board of the Pittsburgh Tax Club and member of the Allegheny Tax Society
  • LL.M. degree in taxation, New York University School of Law; J.D. degree, University of Pittsburgh School of Law; B.A. degree, University of Pittsburgh
  • Can be contacted at [email protected] or 412-288-3298

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