Table of Principal Types of Partnership Tax Provisions Potentially Necessary in the Operating

Table of Principal Types of Partnership Tax Provisions Potentially Necessary in the Operating

EXHIBIT B

PRINCIPAL TYPES OF PARTNERSHIP TAX PROVISIONS POTENTIALLY NECESSARY IN DRAFTING THE OPERATING AGREEMENTS OF MULTI-MEMBER LLCs
TAXABLE AS PARTNERSHIPS--OVERVIEW

Preliminary note. Listed below are 22 types of partnership tax provisions potentially necessary in the operating agreements of multi-member LLCs taxable as partnerships. Where appropriate, the list below identifies the principal federal tax authorities relevant to these provisions. e

  1. Tax distribution provisions. (No specific relevant federal tax authorities.)
  2. Provisions allocating partnership nonrecourse deductions. Regs. § 1.704-2.
  3. Provisions allocating partner nonrecourse deductions. Regs. § 1.704-1
  4. Partnership minimum gain chargeback provisions. Regs. §§ 1.704-2(i)(4)and 1.704-2(j)(2)(ii).
  5. Partner minimum gain chargeback provisions. Regs. §§ 1.704-2(i)(4)and 1.704-2(j)(2)(ii).
  6. Provisions allocating gains and losses in respect of contributed property. IRC § 704(c)(1)(A); Regs § 1.704-3.
  7. Revaluation provisions. Regs § 1.704-1(b)(2)(iv)(f).
  8. Provisions to ensure that “special allocations” have “economic effect” under IRC §704(b). IRC § 704(b) and Regs. § 1.704-1(b)(2)(ii).
  9. Provisions for the proper maintenance of IRC § 704 book capital accounts. IRC § 704(b) and Regs. § 1.704-1(b)(2)(iv).
  10. Provisions to ensure that special allocations have “substantial economic effect” under IRC § 704(b). IRC § 704(b) and Treas. Regs. 1.704-1(b)(2)(iii).
  11. Provisions for profits interests. Rev. Proc. 93-27; Rev. Proc. 2001-43, 2001-2 C.B. 91 (expanding Rev. Proc. 93-27 to apply to grants of unvested profits interests).
  12. Provisions concerning IRC § 754 “inside basis step-up” elections. IRC § 754.
  13. Provisions for tax matters partners. IRC §§ 6221 through 6234; Regs § 1.301.6231(a)(7)-2.
  14. Provisions dealing with taxable partnership distributions to the partners. “Disguised sales” under Section 707(a)(2)(B) (disguised sales); contributions and distributions of built-in gain or loss property distributed within seven years after contribution (IRC § 704(c)(1)(B) and Regs. § 1.704-4(e); partnership distributions to partners who have contributed property to it of property other than the contributed property within seven years after the contributing partner makes the contribution (IRC § 737); certain sales of partnership property to partners in exchange for installment notes (Reg. § 1.704-3(a)(8)); disproportionate distributions by a partnership to a partner of unrealized receivables and inventory (IRC §751(b)).
  15. Provisions under Prop. Reg. §1.1402(a)-2 to protect partnership partners from Self-Employment Taxes. Prop. Reg. §1.1402(a)-2.
  16. Family partnership provisions. IRC § 704(e).
  17. Provisions designed to maximize estate and gift tax discounts. IRC Chapter 14 and related IRC provisions.
  18. Investment partnership provisions. IRC § 721(b)
  19. Provisions for “targetallocations.” No specific federal tax authorities.
  20. Exculpatory allocations. T.D. 8385, 56 Fed. Reg. 66978-66996 (December 27, 1991).
  21. Provisions concerning partnership tax elections. IRC § 703(b).

C:\J2\WealthCounsel - JMC articles - 7-23-13 ff\Exhibit B - one-page list of key partnership tax pvns and fed tax auys - 5-6-14.doc

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