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Partnership Debt: Allocating Liabilities for Loss Deductions

Recourse vs. Nonrecourse, Inside vs. Outside, Negative Basis and Suspended Losses

A live 110-minute CPE webinar with interactive Q&A

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Friday, December 13, 2024

1:00pm-2:50pm EST, 10:00am-11:50am PST

Early Registration Discount Deadline, Friday, November 15, 2024

or call 1-800-926-7926
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This webinar will explain how partnership debt impacts loss deductions for members and partners in LLCs and partnerships. Our panel of pass-through entity experts will discuss how partnership liabilities are categorized, address how debt impacts basis determinations and, hence, loss deductions for partners, and present scenarios examining situations frequently encountered by tax professionals when allocating liabilities.

Description

One of the most complicated components of partnership returns is understanding partnership liabilities and how liabilities impact a partner's basis. At the same time, tracking and recording partnership debt is critical to allocating and deducting losses to partners.

Partnership debts are classified as recourse, nonrecourse, and qualified nonrecourse liabilities. As defined by the Internal Revenue Service, a liability is recourse to "the extent a partner or related person bears the economic risk of loss for the liability." In contrast, a debt is nonrecourse if no partner bears a risk of economic loss. Qualified nonrecourse liabilities are liabilities that are nonrecourse but secured by qualifying real estate. Qualified nonrecourse liabilities increase a partner's at-risk basis.

Since debt allocations increase a partner's basis and can similarly increase a partner's loss deduction, several problematic scenarios arise for tax practitioners. When debt exceeds the basis of property in a partnership, minimum gain can be triggered. Losses can be suspended if a partner does not have sufficient at-risk basis. Partnership advisers must grasp the rules concerning partnership debt allocations to report and deduct partners' losses correctly.

Listen as our authoritative panel of federal taxation experts breaks down the complexities of partnership debt allocations.

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Outline

  1. Partnership debt: introduction
  2. Limited liability partnerships vs. other partnerships
  3. Recourse liabilities
  4. Nonrecourse liabilities
  5. Inside vs. outside basis
  6. Qualified nonrecourse liability
  7. Types of guarantees
    1. Bottom-dollar payment obligations
    2. Bad boy guarantees
    3. Other
  8. Anti-abuse rules
  9. Partnership minimum gain
  10. Negative basis
  11. Suspended losses

Benefits

The panel will cover these and other critical issues:

  • Allocating nonrecourse debt to partners
  • Handling problematic issues including negative capital accounts and suspended losses
  • How debt impacts partnership minimum gain
  • Identifying arrangements frequently encountered including bottom-dollar guarantees and carveouts

Faculty

Amaya-Lainez, Mario
Mario Amaya-Lainez, CPA
Director
Citrin Cooperman

Mr. Amaya-Lainez specializes in partnership taxation with a primary focus on partnership restructurings, such as...  |  Read More

Torhan, Michael
Michael Torhan
Partner
EisnerAmper

Mr. Torhan is a Tax Partner in the Real Estate Services Group. He provides tax compliance and consulting services to...  |  Read More

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