Partnership Basis, Debt, and Restructuring Planning

This chapter covers the planning flexibility that makes partnerships and LLCs powerful but technically demanding. The key issues are how to shift tax items, whether a Section 754 election improves the result, how liability allocations affect loss usage, and what happens when partnerships merge, divide, or roll up.

In This Chapter

• Special Allocation Planning for Income, Gain, Loss, and Deduction Shifts addresses the planning appeal and tax limits of targeted allocations.
• Section 754 Elections and Basis Step-Up Planning on Transfers and Distributions explains how basis adjustments can change partner outcomes.
• Debt Reallocation Planning and Its Effect on At-Risk and Passive Loss Rules shows how liability design changes deductible losses.
• Roll-Ups, Partnership Mergers, Divisions, and Restructuring Planning covers transaction design when partnership structures are combined or separated.

How to Use This Chapter

• Keep the earlier partnership compliance chapter nearby because the planning questions here assume comfort with basis, allocations, and distributions.
• Revisit the Section 754 and debt lessons when a fact pattern turns on inside-versus-outside basis or suspended-loss relief.

In this section

• Special Allocation Planning for Income, Gain, Loss, and Deduction Shifts
  Partnership planning for special allocations and the substantial-economic-effect limits on shifting tax items.
• Section 754 Elections and Basis Step-Up Planning on Transfers and Distributions
  Partnership basis-planning rules for Section 754 elections, transfers, and distribution step-ups or step-downs.
• Debt Reallocation Planning and Its Effect on At-Risk and Passive Loss Rules
  Partnership debt-planning issues affecting at-risk amounts and passive-loss limitations.
• Roll-Ups, Partnership Mergers, Divisions, and Restructuring Planning
  Partnership restructuring planning covering roll-ups, mergers, divisions, liability shifts, and disguised-sale risk.