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Guidance on Partnership Disguised Sales and Liabilities

Gain a better understanding on what a disguised sale is and the role of liabilities in partner to partnership disguised sale determinations.

Many taxpayers make investments or operate businesses through entities that are treated as partnerships for U.S. federal income tax purposes, including limited liability companies, limited partnerships, and many foreign entities. A key factor that drives the popularity of partnerships is that many transactions involving partnerships, such as contributions of property to a partnership and distributions of cash from a partnership, can generally be accomplished tax-free. However, the partnership disguised sale rules under Section 707 of the Internal Revenue Code set many traps for the unwary that may result in otherwise tax-free transactions being treated as taxable sales. The disguised sale rules' ambit can capture even innocuous ordinary course transactions and result in unexpected tax liability. This material will provide an overview of these disguised sale rules, with an emphasis on disguised sales of property from a partner to a partnership, the key exceptions to partner to partnership disguised sale treatment, and how assumptions by the partnership of a partner's liabilities factor in to these disguised sale rules. This topic is critical for practitioners and taxpayers that want to maximize the U.S. federal income tax benefits of partnerships while avoiding unexpected pitfalls.

Runtime: 100 minutes
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Why Lorman?

Over 33 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Agenda

What Is a Disguised Sale?

  • Disguised Sale of Property From Partner to Partnership
  • Disguised Sale of Property From Partnership to Partner
  • Disguised Sales of Partnership Interests
  • Disguised Payments for Services

Exceptions to Partner to Partnership Disguised Sale Treatment

  • Guaranteed Payments for Capital
  • Preferred Returns
  • Operating Cash Flow Distributions
  • Reimbursement for Preformation Expenditures

Role of Liabilities in Partner to Partnership Disguised Sale Determinations

  • Qualified Liabilities vs. Non-Qualified Liabilities
  • Determining Liabilities
  • Recent Developments Regarding Guarantees
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Why Lorman?

Over 33 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Credits

OnDemand Course

This course was last revised on September 30, 2020.

Call 1-866-352-9540 for further credit information.

  • Enrolled Agents 2.0
     
  • This program qualifies for 2.0 hours of Continuing Education Credit for enrolled agents under Treasury Department Circular #230 Section 10.6(g).
     

This program does NOT qualify, nor meet the National Standard for NASBA accreditation.

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  • Arizona CLE 1.5
     
  • CA MCLE 1.5
     
  • CT CLE 1.5
     
  • HI CLE 1.5
     
  • ME CLE 1.5
     
  • NJ CLE 2.0
     
  • NY CLE 2.0
     
  • VT CLE 1.5
     
  • WV MCLE 2.0
     
The CLE Code is ONLY a requirement when applying for CLE Credit in California (for participatory credit), Kansas, New Jersey or New York. Other states do not need to supply the CLE Code to apply for CLE credit.

This program does NOT qualify, nor meet the National Standard for NASBA accreditation.

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Why Lorman?

Over 33 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.

Faculty

Leo Greenberg

Leo Greenberg

Skadden, Arps, Slate, Meagher & Flom LLP

  • Associate in the Boston office of Skadden, Arps, Slate, Meagher & Flom LLP
  • Advises public and private companies on a broad range of U.S. federal income tax matters, with particular focus on U.S. and cross-border transactions
  • Practice includes significant work advising multinational companies in connection with domestic and cross-border mergers and acquisitions, and post-acquisition restructuring and integration transactions
  • Co-author of the United States chapter of The Inward Investment and International Taxation Review
  • LL.M. degree in taxation and J.D. degree, summa cum laude, Boston University School of Law
  • Can be contacted at [email protected]
Paul Schockett

Paul Schockett

Skadden, Arps, Slate, Meagher & Flom LLP

  • Partner in the Washington, D.C. office of Skadden, Arps, Slate, Meagher & Flom LLP
  • Advises public and private companies on a broad range of U .S. federal income tax matters, with particular focus on U.S. and cross-border transactions
  • Practice includes significant work involving the tax aspects of partnership transactions and renewable energy project finance
  • Frequently writes and lectures on tax-related topics, including partnership taxation, M&A transaction structuring, tax aspects of troubled company workouts, and renewable energy tax benefits
  • Can be contacted at [email protected]
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Product ID: 407630
Published 2020
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