Reforming subchapter K: the Partnership Tax Simplification Act of 20

• Published in: Taxes Vol. 94; no. 3; p. 361
• Main Authors: Rosow, Stuart L, Hughes, Rachel A
• Format: Journal Article Trade Publication Article
• Language: English
• Published: Riverwoods CCH, Inc 01-03-2016; CCH INCORPORATED
• Subjects: Basis (Taxation); Built-in gains & losses; Flexibility; Foreign source income; Internal Revenue Code; Laws, regulations and rules; Nonrecourse debt; Partnership agreements; Partnership allocations; Partnerships; Prevention; Regulatory reform; Simplification; Tax allocation; Tax avoidance; Tax elections; Tax regulations; Taxation; Taxpayers; United States > US
• ISSN: 0040-0181

This article will examine four topics that are at the core of Subchapter K: partnership allocations under the substantial economic effect rules, classification of partnership liabilities as recourse or nonrecourse, allocations under Code Sec 704(c) and adjustments to basis under Code Secs 743 and 734. For each topic, the article will consider the issues with the current rules, including the difficulties arising from complexity as well as situations in which the rules reach incorrect results, and then will suggest changes that will improve the rules. The suggested changes are focused primarily on simplification, although prevention of taxpayer abuse is also a prominent goal. The suggestions made in this article should be taken as an integrated whole. Changes to the basic allocation rules in Code Sec 704(b) are workable only if there are also changes in Code Sec 704(c) and the treatment of all partnership debt as nonrecourse. The changes to Code Secs 743 and 734 complement these other suggestions.