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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Tax Preparer

Date & Time
  • event Date

    Thursday, October 24, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    110 minutes

Credit Information

  • BARBRI is a NASBA CPE sponsor and this 110-minute webinar is accredited for 2.0 CPE credits.

  • BARBRI is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).

$197.00
CPE
ALL

This course will provide accounting and tax professionals with a deep dive into the tax treatment of Section 751 hot assets when a partner disposes of their partnership interest. The panel will discuss identifying, calculating, and reporting ordinary income from hot assets in the sale of a partnership or LLC interest.

Faculty

Thomas Gray
Partner
Troutman Pepper Hamilton Sanders LLP

With a background in both accounting and law, Mr. Gray focuses his practice on the tax aspects of corporate and partnership transactions, including mergers and acquisitions, reorganizations, restructuring, spin-offs, and equity and debt financings. Additionally, he advises clients on the special tax considerations related to regulated investment companies and real estate investment trusts. Mr. Gray’s experience also includes advising domestic and offshore clients on cross-border tax matters; representing hedge funds on fund structuring and the tax consequences of investments; advising private equity fund investors, including university endowments; negotiating, reviewing, and drafting the tax aspects of stock and asset purchase agreements, partnership agreements and credit agreements; and advising clients on the restructuring of financially troubled entities.

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John T. Alfonsi
Managing Director
Cendrowski Corporate Advisors

Mr. Alfonsi has 25 years of tax consulting, business valuation, litigation support and forensic accounting experience. In the tax planning and consulting arena, he works primarily with partnerships and with private equity, venture capital and hedge funds.

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Description

Generally, when a partner sells their partnership interest, the transaction is treated as the disposition of a capital asset. Any gain from the sale is taxed at lower capital gains rates. A notable exception to this treatment occurs when the partnership holds hot assets detailed in IRC Section 751.

In those cases, the sale of the partnership interest converts a portion of what would be a long-term capital gain to ordinary income, and the sale may require the seller to report ordinary income in a transaction that generates a capital loss. Section 751 was implemented to prevent partners from claiming favorable capital gain treatment on income that would be taxed as ordinary income if realized by the partnership and lists two basic classes of properties requiring reclassification: inventory and unrealized receivables.

Taxpayers holding interests in partnerships with Section 751 assets must be aware, before the sale of the interest, of the different tax treatment of these assets to avoid adverse tax consequences. Section 751 applies when there is a shift in hot assets, whether a partner has capital gains or not.

Because the regulations seem to provide some difference in treatment depending on whether the transaction is structured as a sale of interest or a redemption, tax advisers should calculate the impact of Section 751 assets in each scenario to achieve the best possible tax result.

Listen as our expert panel provides an in-depth exploration of the Section 751 requirements, offering practical guidance and best practices for avoiding unforeseen tax traps in partnership interest dispositions.

Outline

  1. History and background
  2. Section 751(a) asset rules
  3. Reporting
  4. Section 751(b) listed assets
    • Inventory
    • Unrealized receivables
    • Substantially appreciated inventory
  5. Section 751(b) proposed regulations
  6. Non-U.S. partner impact
  7. Planning opportunities

Benefits

The panel will discuss these and other important issues:

  • How does the regime of Section 751 work in calculating gain/loss from ordinary income-producing assets held at the partnership level?
  • What assets does Section 751 require to be calculated separately?
  • How are inventory assets treated differently in a redemption vs. a sale of partnership interest?
  • What options are available regarding cost allocation to minimize gain calculations on Section 751 assets?

NASBA Details

Learning Objectives

After completing this course, you will be able to:

  • Identify the specific rules governing tax treatment of Section 751 assets in a partnership disposition
  • Recognize assets that will trigger ordinary income recognition upon sale of a partnership interest
  • Discern circumstances in which a redemption may achieve better tax results for the selling partner than a sale
  • Ascertain differences in the tax treatment of sales of hot assets and other assets sold

  • Field of Study: Taxes
  • Level of Knowledge: Intermediate
  • Advance Preparation: None
  • Teaching Method: Seminar/Lecture
  • Delivery Method: Group-Internet (via computer)
  • Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
  • Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex income tax forms and schedules for partnerships and pass-throughs; supervisory authority over other preparers/accountants. Knowledge and understanding of partnership structures, asset identification, partnership sales and related taxation; Familiarity with sale and redemption of a departing partners interest, characterizing gain and loss determined upon a transfer, and the Net Investment Income Tax.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).