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LLC and Partnership Purchases: Entity Interests vs. Asset Sales

Basis Adjustments, Elections, Tax Reporting, and Structuring in Light of New Partnership Audit Regulations

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, June 5, 2019

Recorded event now available

This course will provide partnership tax advisers with practical guidance on the tax ramifications of structuring the sale of a partnership or LLC entity as an asset sale vs. a sale of partnership interests. The panel will detail basis adjustments and available elections, describe the reporting and advisory challenges for seller and buyer, and discuss the impact of the partnership audit regulations on planning a partnership purchase.

Description

The sale of an LLC or other entity taxed as a partnership entails both negotiation and reporting challenges for tax advisers and is complicated by differing priorities of buyer and seller, including whether to structure the transaction as an asset sale vs. the sale of partnership interests. This is more difficult due to new IRS partnership audit rules for 2018.

Under the new audit regulations, IRS can assert tax adjustments at the partnership level. Advisers to purchasers must assess a target's potential prior tax exposure as part of a pre-purchase diligence review.

Partnership transfers also create tax reporting and calculation challenges for advisers. While buyers may desire a basis step-up, tax advisers must determine when such an election is appropriate.

Another complexity is identifying and reporting ordinary gain from the sale of Section 751 "hot assets" in a partnership transfer. Tax advisers must thoroughly understand the reporting requirements of a partnership interest or asset transfer.

Listen as our experienced panel provides a practical guide to the tax implications of selling assets vs. interest in transferring a partnership or LLC business.

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Outline

  1. Seller's considerations in negotiating the transaction
  2. Buyer's considerations in negotiating the transaction
  3. Impact of the new IRS partnership audit regulations
  4. Tax reporting issues and basis adjustment elections
    1. Section 754 election due to transfer or distribution
    2. Section 743(b) adjustments
    3. Section 734(a) adjustments

Benefits

The panel will discuss these and other relevant topics:

  • New IRS partnership audit rules and effect on a buyer’s strategy in purchasing a partnership interest or assets
  • When an entity sale would benefit a purchaser
  • Determining the character of gain or loss upon a transfer
  • Holding period and basis rules for transfers of partial interests
  • Allocating purchase price

Faculty

Borden, Bradley
Professor Bradley T. (Brad) Borden
Professor of Law
Brooklyn Law School

Professor Borden’s research, scholarship, and teaching focus on taxation of real property transactions and...  |  Read More

Mandarino, Joseph
Joseph C. Mandarino
Partner
Smith Gambrell & Russell

Mr. Mandarino's practice focuses on corporate, tax and finance law. He is involved with a wide variety of...  |  Read More