PS: Special Allocations Under §704(b) Including Targeted Allocations, Part I

General Description:

The Partnership Series is taught on a basic level for new tax professionals. Participants will gain a thorough understanding of the planning opportunities and pitfalls of special allocations (including targeted allocations) of a partner's distributive share of income, gain, loss, deduction, or credit, as well as LLC allocations and the sharing of partnership debt.

Learning Objective:

After completing this course the participant will be able to:

• Describe the types of special allocations.
• Describe the purpose of §704(b).
• Explain the basic requirements of the economic effect test and the alternate economic effect test, and evaluate the terms in the operating agreement.
• Define a waterfall provision and a targeted allocation and determine whether the operating agreement is using a waterfall provision or a targeted allocation.
• Determine when §704(b) applies.
• Explain a reverse §704(c) allocation.
• Allocate income and loss under the primary economic effect test.
• Allocate income and loss under the alternate economic effect test.
• Recognize nonrecourse deductions, qualified income offset, and minimum gain chargeback.
• Describe how to allocate income and loss under the partner's interest in the partnership (PIP) test.
• Summarize the difference between the use of a waterfall provision and a targeted allocation in an operating agreement.

Instructors:

Mark A. Vogel is a retired professor and director of the University of Denver Graduate Tax Program, where for 38 years he taught courses in individual, fiduciary, tax accounting, partnership, and corporate taxation. He is the author of Divorce Taxation Guide (John Wiley & Sons) and Individual Taxation (Shepards/McGraw-Hill). He received a J.D. and LL.M. in Taxation from the University of Denver College of Law and an undergraduate accounting degree from the University of Notre Dame. He is also a CPA licensed in Illinois.

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