Page 347 - TaxAdviser_2022

TAX CLINIC

share of liabilities, or any decrease in a
partner’s individual liabilities by reason
of the assumption by the partnership of
the individual liabilities, is considered a
distribution of money to the partner by
the partnership. In addition, a partner
recognizes gain to the extent that any
money distributed exceeds the adjusted
basis of the partner’s interest in the
partnership.
■ Does the allocation of liabilities shift
in the divided, recipient, or resulting
partnership such that a partner may
recognize a distribution in excess of
basis?
Secs. 704(c)(1)(B) and 737 — the
“mixing-bowl rules”: The mixing-
bowl rules are intended to prevent
partners from using a partnership to
swap property in a nonrecognition
transaction. If a partner has contributed
property within the past seven
years and either (1) that property is
distributed to a different partner, or (2)
different property is distributed to the
contributing partner, then tax-deferred
treatment is turned off and gain may be
recognized.
■ Will any partner that contributed
property to the divided or prior part-
nership within the past seven years
receive a distribution of either assets or partnership. Transfers made within two
partnership interests? years are presumed to be a sale unless Procedure & Administration
Note that the partnership division the facts and circumstances clearly
will restart the seven-year clock for any establish that the transfers do not Interest claim limitation
mixing-bowl applicable transactions constitute a sale, and ordering does not periods, including for ‘net
on a go-forward basis for a recipient matter. rate’ netting claims
or resulting partnership. Consider ■ Did any partner contribute money Various periods of limitation apply to
also the application of the successor or property to the divided or prior claims filed with the IRS in the context
rules under Regs. Secs. 1.704-4(d)(2) partnership within the past two years? of underpayment interest under Sec.
and 1.737-1(c)(2)(iii) on the deemed ■ Do any of the contributions to a recipi- 6601 or overpayment interest under
contribution of assets under the assets- ent or resulting partnership involve Sec. 6611. Taxpayers should be aware
nonqualified liabilities?
over form. contribution of property into a new of the time frames to file refund claims
PHOTO BY MARILYN NIEVES/ISTOCK transfer of property by a partner to a partnership will restart a two-year clock est, as well as important actions needed
Sec. 707(a)(2)(B) — the
Like the mixing-bowl rules, the
for overpaid underpayment interest and
“disguised-sale rules”: If a
claims for additional overpayment inter-
to monitor disguised sales on a go-
to “fully protect” taxpayer rights.
partnership and one or more transfers
Sec. 6601 provides that if tax im-
of money or other consideration by the
forward basis for a recipient or result-
posed by Title 26 is not paid by the due
ing partnership.
partnership to that partner are made,
From Corey Dalton, CPA, Charlotte,
date for payment, underpayment interest
the transfers may be treated as a sale
N.C.
of property between the partner and
The Tax Adviser
16 July 2022 must be paid on the unpaid amount, at