Partnerships are incredibly flexible tax devices, allowing many options in determining what appears on each partner’s K-1. IRC 704(b) and (c) determine, in combination with the partnership agreement, the numbers that appear on each partner’s Schedule K-1. In this course we’ll take a look at the responsibilities a CPA has in calculating the proper allocations to each partner. We’ll look at the mandatory adjustments for precontribution built-in gains or losses of each partner and the requirements to have partnership special allocations respected.
Course ID: GKPA4
Getting to the K-1: Partnership Allocations under 704(b) and 704(c)
- Recognize when the mandatory rules of 704(c) apply to contributions of property to a partnership Calculate proper allocation under each of the three safe-harbor methods of handling 704(c) List the requirements for an allocation to have substantial economic effect under the partnership regulations
The difference between items impacted by 704(b) and 704(c) How to apply the traditional method, traditional method with curative allocations and the residual method for contributed property Situations that trigger a “reverse 704(c)” allocations How to compute the partners’ 704(b) book capital accounts and why it matters Applying a qualified income offset
DESIGNED FORCPAs responsible for advising partnerships on tax matters or preparing Schedule K-1s.
FIELD OF STUDY