Section 743(b) Adjustments in Multi-Tier Partnerships: Applying Rev. Rul. 87-115 to Upper- and Lower-Tier Entities

From both planning and compliance aspects, a partnership's distribution of a partnership interest under Sec. 743(b) can be one of the most challenging issues facing partnership tax advisers. Calculations that are complex when applied to single-layer partnerships become even more complicated when applied to a multi-tier partnership structure. Advisers serving multi-tier partnership clients must know not only the 743(b) rules but also how to apply those rules in the context of a tiered partnership structure.

Treasury has issued rulings on when basis adjustments under 743(b) are mandatory, optional, or impermissible without additional action. Rev. Rul. 87-115 details adjustments that must be made in the context of the sale of an interest in an upper-tier partnership, depending on which partnership tier has an active Section 754 election in place.

Prior to any sale transaction, the partnership's tax advisers should have a thorough understanding of when each tier of the partnership may make a basis adjustment, as well as the steps to take if a 743(b) adjustment is appropriate but unavailable. Advisers must be able to determine whether 743(b) adjustment is advantageous to each partnership tier.

Listen as our panel of veteran advisers provides practical guidance in the form of a detailed case study on the ins and outs of Section 743(b) adjustments and allocations, leaving you prepared to advise on the planning and compliance tasks of this complex area of partnership taxation.

1. Section 754 election and interaction between Sections 754-755
2. Transactions giving rise to adjustments under Sect. 743(b)
3. 743(b) basis adjustment rules for multi-tier structures under Rev. Rul. 87-115
   • When both UTP and all LTPs have a valid Section 754 election in place
   • When only the UTP has made a valid Section 754 election
   • When only the LTP has made a valid Section 754 election
4. Coordinating tax reporting between UTP and LTPs
5. Segregating individual transactions subject to Section 743(b) allocations
6. Planning opportunities under various scenarios

The panel will review these and other key issues:

• Mechanics of applying 743(b) basis adjustments with various combinations of partnership tiers having Section 754 elections in place
• Allocation of basis adjustments to upper- and lower-tier partnerships
• Reporting requirements and challenges in preparing the Form 1065 return for the upper-tier partnership
• Planning opportunities under various scenarios addressed in Rev. Rul. 87-115

Learning Objectives

After completing this course, you will be able to:

• Determine the proper Section 743(b) basis adjustments under Rev. Rul. 87-115 for multi-tier partnerships
• Identify necessary allocations of basis adjustments to both UTP and LTPs
• Recognize challenges in coordinating tax filings of multi-tier partnerships in which 743(b) adjustments are made upon sale of interest
• Discern the planning opportunities for basis adjustment in multi-tier partnerships when a partnership interest is 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 tax forms and schedules, supervising other preparers/accountants. This program assumes the attendee already has specific knowledge and understanding of the rules governing Section 743(b) adjustments in context and Section 754 elections; familiarity with multi-tier partnership structures, application of IRC sections 755, 734 and 732(d),

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IRS Approved Provider

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