This article reviews and analyzes recent law changes as
well as rulings and decisions involving partnerships.
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TOPICS / PASSTHROUGHS
Contributions, Distributions & Basis
IRS reallocates losses of joint venture among foreign and domestic partners
A CCA memorandum addressed the allocation of partnership losses where certain partners had negative capital account balances.
IRS holds investment transaction is sale of refined coal tax credits
Investors in a partnership were not entitled to deduct credits because the investment transaction was structured solely to facilitate the purchase of the credits.
Tax Court holds microcaptive insurance company was not a bona fide insurer
Tax Court held that amounts passthrough business entities paid to a purported insurance company they
owned were not premiums paid for insurance contracts and not deductible.
Proposed regulations would allow Sec. 754 election without partner’s signature
To ease the regulatory burden on partnerships, the IRS announced that it is eliminating the requirement that partnership elections under Sec. 754 be signed by a partner.
Tax Court denies ordinary abandonment losses in taxpayers’ disposition of partnership interests
Tax Court affirmed the IRS’s decision to recharacterize loss of a partnership disposition from ordinary to capital when the taxpayers failed to provide evidence of abandonment.
IRS permits partnership basis election without partner’s signature
To ease the regulatory burden on partnerships, the IRS announced that it is eliminating the requirement that partnership elections under Sec. 754 be signed by a partner.
Practitioner’s incorrect change to passive status costly
A preparer’s improper change of status of income from active to passive is costly for taxpayers.
Temporary disguised-sale regulations raise concerns
Should the IRS consider recognizing a contributing
partner’s economic risk of loss when the regulations are finalized?
Recent regs. significantly change taxation of certain partnership contributions
Treasury and the IRS issued regulations that generally override nonrecognition treatment for certain contributions of property to partnerships.
The trust fund recovery penalty and LLCs
A responsible person may be subject to the TFRP if it can be shown he or she willfully failed to pay the trust fund taxes due.
Election to group activities for purposes of passive activity loss rules
The Tax Court held that a taxpayer had not elected to group two activities together under the passive
activity loss rules simply by treating both activities as nonpassive.
Sec. 743(b) adjustment complications in multitier partnerships
Sec. 743(b) adjustments are complex, and multitier partnership structures only exacerbate that complexity.
Current Developments in Partners and Partnerships
This article reviews and analyzes recent law changes as well as rulings and decisions involving partnerships.
Basis for “Bad Boys”
Including “bad boy” provisions in loan agreements is a common practice to protect the lender in the commercial real estate finance industry.
Advantages of an Optional Partnership Basis Adjustment
The optional basis adjustment election is an attempt to allow partners to correct certain discrepancies by affecting a transferee’s allocable basis in the underlying partnership assets.
How the COD Rules Apply to Grantor Trusts and Disregarded Entities
New regulations provide rules for determining
who is the “taxpayer” for purposes of applying the Sec. 108 discharge-of-indebtedness rules to a grantor trust or disregarded entity.
Recognizing When a Disguised Sale of Property Takes Place
Property transfers between a partner and a partnership are considered to be a taxable sale of the property under certain circumstances.
Final Regulations Clarify COD Rules for Grantor Trusts and Disregarded Entities
The IRS finalized regulations that provide rules for determining who is the “taxpayer” for purposes of applying the Sec. 108 discharge-of-indebtedness rules to a grantor trust or disregarded entity.
Regulations Clarify: Partners Cannot Be Employees
The IRS issued temporary regulations clarifying that partners in a partnership that owns a disregarded entity cannot be treated as employees of the disregarded entity.
INDIVIDUALS
Current Developments in Taxation of Individuals: Part 1
This update surveys recent federal tax developments involving individuals, including court cases, rulings, and guidance issued during the six months ending October 2025.
