Page 524 - TaxAdviser_2022

PARTNERS & PARTNERSHIPS

appreciated stock under Sec. 170(e)
PTPs are subject to (5)(B). Remember, PTP units are not Given that losses from
stock but rather partnership interests.
the passive-activity- As a result, gifts of appreciated PTPs a PTP can be offset
loss rules just like to a private foundation are limited to only from income or
the donor’s basis.
other partnership In addition, private foundations are gain from that specific
investments but with prohibited under Sec. 4941 from engag- PTP, how could an
added limitations. ing in acts of self-dealing (directly or investor go about
indirectly) with a disqualified person.
monetizing a loss?
Thus, the contribution of partner-
ship units to a private foundation that
of debt relief to FMV of assets) of includes a bargain-sale component re-
the $5,000 gain would be ordinary. In quires the donor to consider whether he
this instance, the charitable deduction or she is a disqualified person in relation Be aware, too, that donations of a
would be limited to $28,000 ($40,000 to the private foundation. The defini- PTP interest will not result in the rec-
FMV, less $12,000 remaining ordinary tion of disqualified persons is broad and ognition of PALs other than to offset
income recapture). Modeling is key to encompasses many contributors and any gain/income recognized on the con-
determining the deduction allowable individuals related to a foundation under tribution. Any suspended PALs will be
from a donation of a PTP interest to a Sec. 4946(a)(1), including someone added to the basis of the interest gifted to
charity — and whether it makes sense. who is a substantial contributor to the charity. Also, these donations are subject
Taxpayers gifting partnership foundation; the foundation manager; an to extensive and complex substantiation
interests to private foundations are owner of more than 20% of a corpora- requirements, including a qualified ap-
subject to greater limitations on tion, partnership, or enterprise that is praisal, qualified acknowledgment letter
their deductions. The deduction for a contributor to the foundation; or a from the charity, and completion of Form
a donation of appreciated property family member of one of these people. 8283, Noncash Charitable Contributions.
to a private foundation is limited Under Regs. Sec. 53.4941(d)-2(a)(1), The requirements above should not
to the lesser of the donor’s basis or if a disqualified person makes a gift of necessarily prevent charitably inclined
the FMV of the interest, unless the a PTP interest to a private foundation persons from considering donating their
property is qualified appreciated stock and there is a bargain-sale component, PTP units. But the complications noted
under Sec. 170(e)(5). Despite the fact then the transaction will be a prohibited above require careful planning and
that PTPs are often thought of as transaction — resulting in the transac- modeling to determine the implica-
marketable securities, PTP interests tion having to be unwound and excise tions of a gift of a PTP interest to a
are not considered to be qualified taxes owed. charitable organization. As you can see,

Ordinary income recapture

Purchase Cumulative Gain subject to
Units sold Sale date Sales proceeds price/initial adjustments Cost basis recapture as
basis amount to basis ordinary income

50,000 01/01/2020 $200,000 $100,000 ($75,000) $25,000 $100,000

Form 4797, Part
Form 8949, Form 8949,
References II, line 10; Form
column D column E
8949, column G

38 October 2022 The Tax Adviser