Surgent's Section 754 Step-Up in Basis: Understanding the Tax Issues for Partnerships and LLCs

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Location: Online

2Credits

Technical Business

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Product Code: SU24-S754-SSWC

Level: Intermediate

Vendor: Surgent

Field of Study: Taxes

Overview:

When a purchaser buys an existing partner's partnership interest or the interest of a member of a limited liability corporation (LLC) taxed as a partnership, the amount paid becomes the basis for the purchaser's partnership interest (outside basis). If the partnership's assets have appreciated sufficiently, the difference between the new partner's inside and outside basis can be substantial. This disparity can deprive the new partner of depreciation deductions and inflate his or her share of the gain from subsequent property dispositions unless a Section 754 election is in effect. The Section 754 election can also apply when a partnership makes a distribution of property and the basis of the distributed property to the partnership and the basis the partner/distributee will take in the distributed property are not equal. In this case, a partnership can recover basis it would otherwise lose if the 754 election were not in effect.

Objectives:

Determine the amount of a Section 754 basis step-up
Know how to allocate the basis step-up to the partnership's assets
Know how a partnership makes a Section 754 election and reports it to the IRS

Major Topics:

How and why a partnership makes a 754 election
The effect of the 754 election when an interest in a partnership is sold or inherited
How the 754 election applies when a partnership makes a distribution of property to one or more of its partners
How to make the 754 basis adjustment

Designed For:

Any Accounting and Finance Professional who wishes to understand the tax rules and economic opportunities associated with having a partnership make a Section 754 election

Prerequisite:

A basic understanding of the tax rules impacting individuals and pass-through entities

Additional Info:

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For technical support, registration questions or other customer service-related inquiries, please call (800) 778-7436 or email [email protected]. Phones are staffed from 8:30 a.m. to 5:00 p.m. Eastern Time, Monday through Thursday, and 8:30 a.m. to 4:00 p.m. Eastern Time on Friday.