Revaluations in Upper-Tier Partnerships — An Alternative Approach

Revaluations in Upper-Tier Partnerships — An Alternative Approach

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In an article published in Tax Notes, Partner Rob Burke argues that the two most commonly suggested approaches for dealing with revaluations of the assets and capital accounts of an upper-tier partnership can produce inappropriate results, and he suggests an alternative approach. Read the full publication.

Excerpt: Section 704(c)(1)(A) is a seemingly modest provision. It requires that: "income, gain, loss, and deduction with respect to property contributed to the partnership by a partner shall be shared among the partners so as to take account of the variation between the basis of the property to the partnership and its fair market value at the time of contribution."

Over the last three decades, the principles underlying this code section have slowly but surely wound their way throughout the entirety of subchapter K. For a provision that for the first 30 years of its existence was entirely elective and applied only to actual contributions of assets in kind to a partnership, its principles now apply in a dizzying array of circumstances and are the subject of multiple additional code provisions, several sets of final regulations, at least three sets of proposed regulations, and one set of temporary regulations. Together, these rules present an intricate mathematical maze that only a few tax advisers who specialize in subchapter K have any hope of navigating.

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