FOR LIVE PROGRAM ONLY Section 754 Elections on Form 1065: Making Valid Elections, Seeking Relief For Missed or Invalid Elections WEDNESDAY , OCTOBER 11, 2017, 1:00-2:50 pm Eastern IMPORTANT INFORMATION FOR THE LIVE PROGRAM This program is approved for 2 CPE credit hours . To earn credit you must: • Participate in the program on your own computer connection (no sharing) – if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa, MasterCard, Discover . • Listen on-line via your computer speakers. • Respond to five prompts during the program plus a single verification code . You will have to write down only the final verification code on the attestation form, which will be emailed to registered attendees. • To earn full credit, you must remain connected for the entire program. WHO TO CONTACT DURING THE LIVE EVENT For Additional Registrations : -Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Live Program : -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN.
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Section 754 Elections on Form 1065 Oct. 11, 2017 Simona Raulea, Tax Director Pamela A. Fuller, JD, LLM (Tax Law), Counsel PricewaterhouseCoopers, New York Gremminger Law Firm, Washington, D.C. simona.raulea@pwc.com pafuller@gremmingerlawfirm.com Dina A. Wiesen, Senior Manager, National Tax Office, Passthroughs Deloitte Tax, New York dwiesen@deloitte.com
Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
Section 754 Elections on Form 1065 Making Valid Elections, Seeking Relief for Missed or Invalid Elections October 2017 Gremminger Law Firm
Agenda I. Reporting Timely Section 754 Election A. Code and Regulations B. Partners’ Consent Statements C. Documentation required in the absence of partner consent filing D. Calculations E. Other Issues F. Example II. Relief under Treas. Reg. § 301.9100 III. Remedies for correcting defective or invalid elections after the filing year IV. Revocation of a Section 754 Election October 2017 PwC | Deloitte | Gremminger Law Firm 6
Reporting Timely Section 754 Election October 2017 PwC | Deloitte | Gremminger Law Firm 7
Section 754 - Overview • Under the aggregate theory, a partner’s basis in its partnership interest equals its share of the partnership’s basis in its assets • However, this equality can be thrown off by the following: - Sale of a partnership interest - Distribution of cash in excess of basis - Distribution of property with different tax basis • To cure disparities, Section 754 allows partnership to adjust the inside basis of partnership property under Sections 734 and 743 and allocate those adjustments under Section 755 October 2017 PwC | Deloitte | Gremminger Law Firm 8
Section 754 - Overview • If a partnership files an election, in accordance with regulations prescribed by the Secretary, the basis of partnership property shall be adjusted, in the case of a distribution of property, in the manner provided in Section 734 and, in the case of a transfer of a partnership interest , in the manner provided in Section 743. • Such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable year with respect to which such election was filed and all subsequent taxable years. • Such election may be revoked by the partnership, subject to such limitations as may be provided by regulations prescribed by the Secretary. October 2017 PwC | Deloitte | Gremminger Law Firm 9
Section 754- Making the Election • For a Section 754 Election to be valid, a written statement must be attached to the partnership return and filed no later than the return due date (including extensions). • Two statements should be attached to the return for the taxable year during which the distribution or transfer occurs: 1. Statement of Section 754 Election i. Name and address of the partnership making the election ii. Signature of one of the partners iii. A declaration that the “partnership elects under section 754 to apply the provisions of section 734(b) and section 743(b) ” 2. Section 734(b) / Section 743(b) October 2017 PwC | Deloitte | Gremminger Law Firm 10
Section 754 – Sample Statement Section 754 Election Statement [Taxpayer Name] [Taxpayer Address] [Taxpayer City], [Taxpayer State] [ZIP Code] Identification Number: [Fed. ID#] [Taxpayer Name] hereby elects under Code Sec. 754 and Reg. §1.754-1(b) to apply the provisions of Code Secs. 734(b) and 743(b). The election is effective beginning with the tax year ending [Year End]. A Code Sec. 754 election is not currently in effect. ________________________________________ Date:____________________ [Signing Partner ]--Partner October 2017 PwC | Deloitte | Gremminger Law Firm 11
Section 743(b) – Partnership’s Sample Statement [Partnership Name] [Partnership Address] [Partnership City], [Partnership State] [ZIP Code] Identification Number: [Fed. ID#] As required by Reg. § 1.743-1(k)(1)(i), this statement is submitted by [Partnership Name] as an attachment to its [Year] partnership return. The name of the transferee is [Transferee Name], TIN [Fed. ID#]. The computation of the basis adjustment is as follows: [Computation of Basis Adjustment] The basis adjustment has been allocated to the following partnership properties: [Partnership Properties] ________________________________________ Date: ____________________ [Partnership Representative] [Partnership Name] October 2017 PwC | Deloitte | Gremminger Law Firm 12
Section 743(b) – Buying Partner’s Sample Statement [Transferee Name] [Transferee Address] [Transferee City], [Transferee State] [ZIP Code] Identification Number: [Fed. ID#] As required by Reg. § 1.743-1(k)(1)(ii), this statement is submitted as an attachment to the [Year] federal income tax return of [Transferee Name]. The name of the transferee is [Transferee Name], TIN [Fed. ID#]. The computation of the basis adjustment is as follows: [Computation of Basis Adjustment] The basis adjustment has been allocated to the following specific properties: [Properties] ________________________________________ Date: ____________________ [Transferee Name] October 2017 PwC | Deloitte | Gremminger Law Firm 13
Section 743(b) – Buying Partner’s Notice of Transfer of Units [Transferee Name] [Transferee Address] [Transferee City], [Transferee State] [ZIP Code] Identification Number: [Fed. ID#] Submitted to: [Partnership Name] [Partnership Address] [Partnership City], [Partnership State] [ZIP Code] As required under Reg. § 1.743-1(k)(2)(i), [Transferee Name] is notifying you of a sale or exchange of a partnership interest that occurred on [Date]. The transferor's information (if ascertainable) is as follows: [Enter the name, address and taxpayer identification number of the transferor (if ascertainable). If not ascertainable, state that fact. Also, describe the relationship (if any) between the transferee and the transferor.] Liabilities assumed: [Enter the amount of any liabilities assumed or taken subject to by the transferee. If none, state that fact.] Payment for the interest: [Enter the amount of any money or the fair market value of any other property delivered or to be delivered for the transferred interest in the partnership. If none, state that fact.] Additional information: [Provide any other information necessary for the partnership to compute the transferee's basis. If none, state that fact.] Under penalties of perjury, I declare that I have examined the information contained in this notice, and, to the best of my knowledge and belief, the facts presented in the notice are true, correct and complete. ________________________________________ Date: ____________________ [Transferee Name] October 2017 PwC | Deloitte | Gremminger Law Firm 14
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