Magazine article The CPA Journal

Controversial New Partnership Anti-Abuse Regulations Proposed

Magazine article The CPA Journal

Controversial New Partnership Anti-Abuse Regulations Proposed

Article excerpt

On May 17, Treasury issued proposed anti-abuse regulations under IRC Sec. 701 If finalized in their current form, these regulations will empower IRS to disregard the form of one or more transactions whenever partnerships are used to substantially reduce the present value of the partners' aggregate federal tax liability "in a manner that is inconsistent with the intent of subchapter K" (the IRC's rules for partnership taxation). Hearings on the proposed regulations are set for July 25.

Although the proposed regulation purports to leave traditional tax-sheltering techniques intact, it is so broadly drafted that these longstanding techniques will be palled. Perhaps most galling is that Treasury is granting itself this new tool strictly by fiat. Hopefully, a large room has been reserved for the public hearing because strong opinions on the proposed regulation abound.

The regulation specifies the following six approaches the IRS could use to recast suspect transactions (but the IRS is not limited to these six). First the partnership could be disregarded in whole or in part in determining tax effects of a transaction. Second, one or more of the partners could be treated as a non-partner. Third, partners could be deemed to own partnership assets directly, thereby precluding special allocations involving those assets. Fourth, accounting methods could be "adjusted" to clearly reflect income. Fifth, allocations could be disregarded or reallocated. Finally, "the intended tax vestment [could] be otherwise precluded. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.