• Partnership Tax

Discovering opportunity for partnership-based organizations.

Business organizations treated as partnerships for tax purposes typically have significant flexibility in sharing economic results among the owners. This flexibility, however, often comes with a high degree of complexity. Following tax reform, the level of complexity in partnership tax law has only increased.
 
At BDO, our Partnership tax professionals specialize in helping clients navigate these rules. Services provided by BDO’s federal Partnership tax specialists include:
 
  • Tax Reform has significantly changed the tax environment facing taxpayers. Some changes, such as the Section 199A deduction for qualified business income, create tremendous tax savings opportunities. Other aspects of Tax Reform, such as the new carried interest rules, present potential increases in a taxpayer’s overall tax liability. BDO Partnership tax specialists are leading the way in assisting clients in navigating these rules in order to maximize the potential business partnership tax benefits of Tax Reform while working to minimize the detriments. Examples of Tax Reform related services include:
    • Our team have been leaders in helping clients analyze and implement the new Section 199A deduction. Leveraging a comprehensive set of processes and internally-developed tools, BDO Partnership tax professionals are working to ensure clients are able to maximize this potentially significant benefit.
    • In coordination with other National Tax Office specialists, we assist clients in evaluating the impact resulting from the new business interest limitation rules under Section 163(j). When applied to organizations taxed as partnerships, complex tracking and allocations are necessary to ensure ultimate benefit is attained by the partners.
    • Under the new Section 1061 carried interest rules, gains historically treated as long-term capital gain are subject to recharacterization as short-term gain. Our team of Partnership tax specialists is working to properly implement these rules as well as developing possible solutions to minimize the potential impact.
     
  • Our team is highly experienced in assisting clients with complex partnership tax transactions and partnership tax planning. Coordinating with our clients, legal counsel, and investment advisors, we regularly work to design and implement complex partnership structures intended to meet the economic arrangement between partners in a tax-efficient manner. Examples of partnership transaction services include:
    • Initial public offering transactions utilizing a partnership, i.e., Up-C IPO
    • Partnership merger and division transactions including structuring pre-tax roll-over arrangements
    • Leveraged partnership transactions
    • Disguised sale of property and partnership interest transactions
    • Use of noncompensatory partnership options to achieve economic objectives
    • Analysis of partnership agreements and development of comprehensive Section 704(b) capital account schedules and income/loss allocation models
    • Transaction modeling in order to evaluate potential consequences including projections for complex Section 704(c) allocations, liability allocations, and basis adjustments under Section 743(b) and 734(b)
     
  • Throughout the life-cycle of a partnership, it is necessary to accurately track the economic arrangement among the partners. Using internally-developed tools and their extensive experience, BDO Partnership tax specialists regularly assist clients with computations such as:
    • On-going maintenance of Section 704(b) capital account schedules, including annual income/loss allocation and tracking of capital account revaluations and other transactions impacting the partner’s economic capital accounts
    • Maintenance of Tax Basis and Section 704(b) basis variances, including required Section 704(c) allocations resulting from multiple forward and reverse layers
    • Partnership liability allocations under Section 752, including determination of recourse vs. nonrecourse liabilities
    • Tracking of partnership minimum gain, allocation of partner and partnership nonrecourse deductions, and minimum gain chargeback calculations
    • Calculations of basis adjustments under Sections 743(b) and 734(b), including allocation of basis adjustment under Section 755
    • Calculations of gain or loss recognized in connection with disguised sales of property or partnership interests under Section 707
    • Calculations of Section 751 ordinary income recognition with respect to the sale, exchange, or redemption of a partnership interest
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