Alternative methods for measuring a partnership interest

Article Abstract:

Several statutory and regulatory provisions governing partnerships call for the measurement of a partner's overall interest in a partnership, whether in profits or capital, or in other items of income, gain, deduction, loss or credit. Although there are no specific guidelines regarding the determination of such interests, it is advisable to base measurements on partnership allocations, the choice of a partnership tax year, related party transactions, partnerhip terminations, the acquisition and disposition of partnership interests, and the distribution of partnership liabilities. There are several approaches to measuring a partner's interest, including the liquidation approach, analysis of overall interest, analysis of capital interest and analysis of profits interest. These measurement strategies are described.

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Personal residence trusts can reduce transfer taxes

Article Abstract:

A personal residence trust (PRT) can be used by taxpayers in avoiding the general rules of Sec. 2702 which limit the transfer tax savings of gifts in trust with retained interests because the residence does not pay qualified annuity interest. The term interest in a PRT or a qualified PRT (QPRT) may be given a substantial value that can ultimately generate estate tax savings. The development of a PRT can be made easier by relying on guidelines issued by the IRS in the form of final Regulations and private rulings. The PRT is described in Reg. 25.2702-5(b) while the QPRT is described in Reg. 25.2702-5(c). Compared to PRT, the QPRT provides more flexibility because they allow cash deposits to be held in the trust under limited circumstances.

Usage, Transfer taxes, Trusts and trustees, Trustees, Trusts (Law)

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Complex rules for partnership distributions

Article Abstract:

Partnership distribution rules have been amended by the Deficit Reduction Act of 1984 and the Uruguay Round Agreements Act of 1994. The changes are intended to discourage abuses of the partnership structure. Because the new distribution regime is complicated, explaining it to clients presents a challenge to accounting practitioners. The new rules have direct and indirect tax implications for different types of partnership distributions. Accountants have a responsibility to point these out to their partnership clients to avoid any surprise tax burdens. They must pay particular attention to distributions of marketable securities, as well as distributions within five years of an appreciated property's contribution.

Tax Law, Public Finance Activities, Taxation, Partnership distributions

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