IRC 754 Elections for Tax Counsel: Mastering Structuring Considerations of Basis Adjustments

Understanding the Section 754 election and its related basis adjustments is a critical skill for tax counsel serving as advisers to clients owning or managing partnerships. The election allows adjustments on the "inside basis" of assets the partnership owns.

The basis adjustment can have a significant impact when a partnership has an existing 754 election and admits a new partner, has one partner sell a partnership interest, or when the partnership makes a distribution to a partner. The election and adjustments can have different impacts on different partners, so tax advisers need to fully grasp the tax implications of making the election and utilizing the optional basis adjustments.

Tax advisers must understand not only the rules but also the practical calculations, allocations, and reporting mechanics of the 754 election. Counsel may be called upon to help make essential decisions with basis and depreciation issues and to help make complicated adjustment calculations.

Listen as our authoritative panel of tax advisers guides counsel through the basis adjustment rules, discusses the impact of the Section 754 election on individual partners and the partnership, and provides best practices for avoiding potential pitfalls of the election.

1. The mechanics of a Section 754 election
2. Inside and outside basis issues
3. Ability to make 754 election due to a transfer
4. What happens under 743(b) when a 754 election is made?
5. 755 Basis adjustments
6. Benefits

The panel will review these and other key issues:

• Mechanics of making a Section 754 election at the partnership level and understanding "inside basis" vs. "outside basis"
• Benefits and disadvantages of making the 754 basis election
• Rules governing step-up and step-down basis adjustments
• Rules for allocating basis adjustments
• Impact of the 754 election on individual partners and the partnership
• Common pitfalls in basis adjustments, and what practitioners can do to avoid these pitfalls

Learning Objectives

After completing this course, you will be able to:

• Identify the basis adjustments--both mandatory and optional--that accompany a Section 754 election
• Determine how specific basis adjustments accompanying a 754 election impact existing partners
• Discern the ordering rules governing the allocation of basis adjustments under the election
• Recognize the planning and strategic considerations in deciding whether to make a 754 election

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).