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As the December 31, 2026 deemed realization event approaches, #QOF investors should be evaluating every available tax planning opportunity. Read FRB's Matthew Rappaport's latest article with Tax Analysts here: frblaw.com/wp-content/u... #FRBLaw #TaxAnalysts #TaxNotes
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July 27, 2026 at 6:33 PM
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"Candidates owe tax disclosure to voters." Here's Why Bernie Sanders Should Still Release His Tax Returns http://www.forbes.com/sites/taxanalysts/2016/07/01/heres-why-bernie-sanders-should-still-release-his-tax-returns/#73b00a616c0a
Here's Why Bernie Sanders Should Still Release His Tax Re...
Bernie Sanders won’t withdraw and won’t endorse Hilary Cl...
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November 24, 2024 at 2:43 PM
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EFTA01154591 | EFTA01154634 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) (E) The partner or related person received arm's length consideration for assuming the payment obligation. (F) In the case of a guarantee or similar arrangement, the partner or related person is or would be liable up to the full amount of such partner's or related person's payment obligation if, and to the extent that, any amount of the partnership liability is not otherwise satisfied. For purposes of this paragraph (b)(3)(ii)(F), the terms of a guarantee or similar arrangement will be treated as modified by any right of indemnity, reimbursement, or similar arrangement regardless of whether that arrangement would be recognized under paragraph (b)(3) of this section. However, the preceding sentence does not apply to a right of proportionate contribution running between partners or related persons who are co-obligors with respect to a payment obligation for which each of them is jointly and severally liable. (G) In the case of an indemnity, reimbursement agreement, or similar arrangement, the partner or related person is or would be liable up to the full amount of such partner's or related person's payment obligation if, and to the extent that, any amount of the indemnitee's or other benefitted party's payment obligation is satisfied. The indemnity, reimbursement agreement, or similar arrangement only satisfies this paragraph (b)(3)(ii)(G) if, before taking into account the indemnity, reimbursement agreement, or similar arrangement, the indemnitee's or other benefitted party's payment obligation is recognized under paragraph (b)(3) of this section or would be recognized under paragraph (b)(3) of this section if such person were a partner or related person. For purposes of this paragraph (b)(3)(ii)(G), the terms of an indemnity, reimbursement agreement, or similar arrangement will be treated as modified by any further right of 44 EFTA01154634
May 12, 2026 at 8:05 AM
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EFTA01154591 | EFTA01154621 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) (f) Ordering rule cross reference. For payments or transfers by a partnership to a partner to which the rules under this section and §1.707-5(b) apply, see the ordering rule under §1.707-5(b)(3). Par. 5. Section 1.707-5 is amended by: a. Removing the language "or would be treated as a recourse liability under that section if it were treated as a partnership liability for purposes of that section" at the end of paragraph (a)(2)(i). b. Removing the language "or would be a nonrecourse liability of the partnership under §1.752-1(a)(2) if it were treated as a partnership liability for purposes of that section" at the end of paragraph (a)(2)(ii). c. Revising paragraph (a)(3). d. Revising paragraph (a)(6)(i)(C). e. Removing the language "and" at the end of paragraph (a)(6)(i)(D) and adding the language "or" in its place. f. Adding paragraph (a)(6)(i)(E). g. Revising paragraph (a)(7)(ii). h. Adding a sentence at the end of paragraph (b)(1). i. Removing the language "property" in paragraph (b)(2)(i)(A) and adding the language "consideration" in its place. j. Revising paragraph (b)(2)(iii). k. Adding paragraph (b)(3). I. Designating the text of paragraph (e) after its subject heading as paragraph 31 EFTA01154621 Epstein Web iOS app on the App Store.
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154619 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) (d) * * * (1) In general. (2) Special rule for certain qualified liabilities. (3) Scope of capital expenditures. (f) Ordering rule cross reference. 41.707-5 Disguised sales of property to partnership; special rules relating to liabilities. (b) * * * (3) Ordering rule. (f) Netting liabilities in assets-over merger or consolidation. Par. 4. Section 1.707-4 is amended by: a. Adding the language "(1) In general." after the heading for paragraph (d). b. Redesignating paragraph (d)(1) as paragraph (d)(1)(i). c. Redesignating paragraph (d)(2) as paragraph (d)(1)(ii). d. Redesignating paragraph (d)(2)(i) as paragraph (d)(1)(ii)(A). e. Redesignating paragraph (d)(2)(ii) as paragraph (d)(1)(ii)(B). f. Revising the second sentence in newly redesignated paragraph (d)(1)(ii)(B) and adding a new sentence at the end of newly redesignated paragraph (d)(1)(ii)(B). g. Adding new paragraphs (d)(2), (d)(3), and (f). The additions and revisions read as follows: §1.707-4 Disguised sales of property to partnership; special rules applicable to guaranteed payments, preferred returns, operating cash flow distributions, and reimbursements of preformation expenditures. 29 EFTA01154619
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154616 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) The proposed regulations also provide transitional relief for any partner whose allocable share of partnership liabilities under §1.752-2 exceeds its adjusted basis in its partnership interest on the date the proposed regulations are finalized. Under this transitional relief, the partner can continue to apply the existing regulations under §1.752-2 for a seven-year period to the extent that the partner's allocable share of partnership liabilities exceeds the partner's adjusted basis in its partnership interest on the date the proposed regulations are finalized. The amount of partnership liabilities subject to transitional relief will be reduced for certain reductions in the amount of liabilities allocated to that partner under the transition rules and, upon the sale of any partnership property, for any excess of tax gain (including section 704(c) gain) allocated to the partner less the partner's share of amount realized. Special Analyses It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the amount of time necessary to report the required information will be minimal in that it requires partners that are business entities and trusts to provide information they already maintain or can easily obtain to their respective partnership. Moreover, it should take a partner no more than 2 hours to satisfy the information requirement in 26 EFTA01154616 Epstein Web iOS app on the App Store.
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154615 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) The IRS and the Treasury Department are aware that the liquidation value approach may not precisely measure a partner's interest in partnership profits but believe that the approach is a better proxy than the significant item and alternative methods and is still administrable. The IRS and the Treasury Department request comments on other methods that reasonably measure a partner's interest in partnership profits that are not overly burdensome. In addition, the IRS and the Treasury Department request comments on whether exceptions should be provided to exclude certain events from triggering a redetermination of the partners' liquidation values. Proposed Applicability Dates The regulations under section 707 are proposed to apply to transactions with respect to which all transfers occur on or after the date these regulations are published as final regulations in the Federal Register. The regulations under §1.752-2 are proposed to apply to liabilities incurred or assumed by a partnership and to payment obligations imposed or undertaken with respect to a partnership liability on or after the date these regulations are published as final regulations in the Federal Register. The regulations under §1.752-3 are proposed to apply to liabilities incurred or assumed by a partnership on or after the date these regulations are published as final regulations in the Federal Register. The IRS and the Treasury Department anticipate that the final regulations under section 752 will permit a partnership to apply the provisions contained in the final regulations to all of its liabilities as of the beginning of the first taxable year of the partnership ending on or after the date these regulations are published as final regulations in the Federal Register. 25 EFTA01154615
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154614 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) of a partner's interest in partnership profits, and one that can provide the needed certainty, is a partner's liquidation value percentage, determined upon formation of the partnership and redetermined upon the most recent occurrence of an event described in §1.704-1(b)(2)(iv)(f)(5), whether or not the capital accounts of the partners are adjusted under §1.704-1(b)(2)(iv)(f) in connection with such event. A partner's liquidation value percentage is the ratio (expressed as a percentage) of the liquidation value of the partner's interest in the partnership to the liquidation value of all of the partners' interests in the partnership. The proposed regulations adopt the liquidation value percentage approach. For purposes of the proposed rule, the liquidation value of a partner's interest in a partnership is the amount of cash the partner would receive with respect to the interest if, immediately after formation of the partnership or the occurrence of the event described in §1.704-1(b)(2)(iv)(f)( ), as the case may be, the partnership sold all of its assets for cash equal to the fair market value of such property (taking into account section 7701(g)), satisfied all of its liabilities (other than those described in §1.752-7), paid an unrelated third party to assume all of its §1.752-7 liabilities in a fully taxable transaction, and then liquidated. The proposed regulations also provide an example illustrating the new liquidation value approach in place of Example 2 in §1.752-3(c) illustrating the alternative method. As the proposed example illustrates, a change in the partners' shares of partnership liabilities as a result of an event described in §1.7041(b)(2)(iv)(f)(5) is taken into account in determining the tax consequences of the event that gave rise to such change. 24 EFTA01154614
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154613 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) partnership agreement may specify the partners' interests in partnership profits so long as the interests so specified are reasonably consistent with allocations (that have substantial economic effect under the section 704(b) regulations) of some other significant item of partnership income or gain (the "significant item method"). Alternatively, excess nonrecourse liabilities may be allocated among the partners in the manner that deductions attributable to those liabilities are reasonably expected to be allocated (the "alternative method"). Similar to the significant item method, under §1.704-2(e)(2), the partnership agreement may allocate nonrecourse deductions in a manner that is reasonably consistent with allocations that have substantial economic effect of some other significant partnership item attributable to the property securing the nonrecourse liability. The IRS and the Treasury Department believe that the allocation of excess nonrecourse liabilities in accordance with the significant item method and the alternative method may not properly reflect a partner's share of partnership profits that are generally used to repay such liabilities because the allocation of the significant item may not necessarily reflect the overall economic arrangement of the partners. Therefore, the proposed regulations remove the significant item method and the alternative method from §1.752-3(a)(3). The IRS and the Treasury Department, however, are aware of the difficulty in determining a partner's interest in partnership profits in other than very simple partnerships and, therefore, recognize the need to have a bright-line measure of a partner's interest in partnership profits. The IRS and the Treasury Department considered several alternatives and believe that, for this purpose, an appropriate proxy 23 EFTA01154613
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154612 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) all partners and related persons. The IRS and the Treasury Department also request comments on the application of the net value requirement of §1.752-2(k) to tiered partnerships. Finally, in determining the amount of any obligation of a partner to make a payment to a creditor or a contribution to the partnership with respect to a partnership liability, §1.752-2(b)(1) reduces the partners payment obligation by the amount of any reimbursement that the partner would be entitled to receive from another partner, a person related to another partner, or the partnership. The IRS and the Treasury Department have considered whether a right to be reimbursed for a payment or contribution by an unrelated person (for example, pursuant to an indemnification agreement from a third party) should be taken into account in the same manner and have concluded that any source of reimbursement that effectively eliminates the partner's payment risk should cause a payment obligation to be disregarded. Therefore, the proposed regulations change the rule in §1.752-2(b)(1) to reduce the partner's payment obligation by the amount of any right to reimbursement from any person. B. Nonrecourse Liabilities The existing regulations under § 1.752-3 contain rules for determining a partner's share of a nonrecourse liability of a partnership, including the partner's share of excess nonrecourse liabilities under §1.752-3(a)(3). Section 1.752-3(a)(3) provides various methods to determine a partner's share of the excess nonrecourse liabilities. Under one method, a partner's share of excess nonrecourse liabilities is determined in accordance with the partner's share of partnership profits. For this purpose, the 22 EFTA01154612
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154611 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) study the issue of extending the net value approach for disregarded entities to other entities. After further consideration, the IRS and the Treasury Department believe that there are circumstances in addition to those involving disregarded entities under which the satisfaction presumption is not appropriate. Thus, the proposed regulations turn off the satisfaction presumption by extending the net value requirement of §1.752-2(k) to all partners or related persons, including grantor trusts, other than individuals and decedent's estates for payment obligations associated with liabilities that are not trade payables. In situations in which the satisfaction presumption is turned off, the proposed regulations provide that the partner's or related person's payment obligation is recognized only to the extent of the partner's or related person's net value as of the allocation date. A partner or related person that is not a disregarded entity is treated as a disregarded entity for purposes of determining net value under §1.752-2(k). The IRS and the Treasury Department request comments on whether it would be clearer if all the net value requirement rules were consolidated in §1.752-2(k). The IRS and the Treasury Department considered further extending the net value requirement of §1.752-2(k) to partners and related persons that are individuals and decedent's estates, but decided not to require such persons to comply with the net value requirement of §1.752-2(k) because of the nature of personal guarantees. However, applying this less restrictive standard to individuals and decedent's estates may disadvantage other entities that enter into partnerships with individuals or decedent's estates. Thus, the IRS and the Treasury Department request comments on whether the final regulations should extend the net value requirement of §1.752-2(k) to 21 EFTA01154611 Epstein Web iOS app on the App Store.
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154610 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) percent of the total interest that will accrue on a partnership nonrecourse liability be guaranteed. As was previously noted, the satisfaction presumption assumes that all partners and related persons will actually satisfy their payment obligations, unless the facts and circumstances indicate a plan to circumvent or avoid the obligation. The satisfaction presumption does not apply, however, to the payment obligations of disregarded entities. Instead, the payment obligation of a disregarded entity for which a partner is treated as bearing the economic risk of loss is taken into account only to the extent of the net value of the disregarded entity, as determined under §1.752-2(k). The preamble to the proposed regulations under §1.752-2(k) requested comments regarding whether the rules for disregarded entities should be extended to the payment obligations of other entities. Some commenters opposed extending the rules to other entities, while other commenters suggested that the anti-abuse rule in §1.752-2(j) could be expanded to cover certain situations involving thinly capitalized entities. One commenter suggested that the anti-abuse rule should apply if a substantially undercapitalized subsidiary of a consolidated group of corporations or a substantially undercapitalized passthrough entity (other than a disregarded entity) is utilized as the partner (or related obligor) for a principal purpose of limiting its owners risk of loss in respect of existing partnership liabilities, and obtaining tax benefits for its owners (or other members of the consolidated group) that would not be available but for the additional tax basis in the partnership interest that results from the satisfaction presumption. Although the final regulations under §1.752-2(k) did not extend the rules for disregarded entities to other entities, the IRS and the Treasury Department indicated that they would continue to 70 EFTA01154610
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154607 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) The existing regulations under section 1.752-2 provide that a partner's share of a recourse partnership liability equals the portion of the liability, if any, for which the partner or related person bears the economic risk of loss. A partner generally bears the economic risk of loss for a partnership liability to the extent the partner, or a related person, would be obligated to make a payment if the partnership's assets were worthless and the liability became due and payable. Subject to an anti-abuse rule and the disregarded entity net value requirement of §1.752-2(k), §1.752-2(b)(6) assumes that all partners and related persons will actually satisfy their payment obligations, irrespective of their actual net worth, unless the facts and circumstances indicate a plan to circumvent or avoid the obligation (the "satisfaction presumption"). Thus, for purposes of allocating partnership liabilities, §1.752-2 adopts an ultimate liability test under a worst-case scenario. Under this test, the regulations would generally allocate an otherwise nonrecourse liability of the partnership to a partner that guarantees the liability even if the lender and the partnership reasonably anticipate that the partnership will be able to satisfy the liability with either partnership profits or capital. The IRS and the Treasury Department have considered whether the approach of the existing regulations under §1.752-2 is appropriate given that, in most cases, a partnership will satisfy its liabilities with partnership profits, the partnership's assets do not become worthless, and the payment obligations of partners or related persons are not called upon. The IRS and the Treasury Department are concerned that some partners or related persons have entered into payment obligations that are not commercial solely to achieve an allocation of a partnership liability to such partner. The IRS and the Treasury Department believe that section 79 of the Tax Reform Act of 1984 17 EFTA01154607
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154605 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) for purposes of determining whether the upper-tier partnership's share of the liabilities of the lower-tier partnership are qualified liabilities. Thus, these proposed regulations provide that a contributing partner's share of liabilities from a lower-tier partnership are treated as qualified liabilities to the extent the liability would be a qualified liability had the liability been assumed or taken subject to by the upper-tier partnership in connection with a transfer of all of the lower-tier partnership's property to the upper-tier partnership by the lower-tier partnership. 6. Treatment of Liabilities in Assets-Over Merger Section 1.752-1(f) provides for netting of increases and decreases in a partner's share of liabilities resulting from a single transaction. Under that rule, increases and decreases in partnership liabilities associated with a merger or consolidation are netted by the partners in the terminating partnership and the resulting partnership to determine the effect of a merger under section 752. The IRS and the Treasury Department believe that similar netting rules should apply with respect to the disguised sale rules and, accordingly, the proposed regulations extend the principles of §1.752-1(f) to determine the effect of the merger under the disguised sale rules. 7. Disguised Sales of Property by a Partnership to a Partner For disguised sales of property by a partnership to a partner, the existing regulations under §1.707-6 provide that rules similar to those in §1.707-5 (for disguised sales of property by a partner to a partnership) apply to determine the extent to which an assumption of or taking property subject to a liability by a partner, in connection with a transfer of property by a partnership, is considered part of a sale. More specifically, the existing regulations provide that if the partner assumes or takes property subject to IS EFTA01154605
May 12, 2026 at 8:04 AM
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EFTA01154591 | EFTA01154604 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) The existing regulations in §1.707-5(e), and §1.707-6(b) by applying rules similar to §1.707-5(e), currently provide only a limited tiered-partnership rule for cases in which a partnership succeeds to a liability of another partnership. Under those rules, if a lower-tier partnership succeeds to a liability of an upper-tier partnership, the liability in the lower-tier partnership retains the same characterization as either a qualified or a nonqualified liability that it had as a liability of the upper-tier partnership. Similarly, if an upper-tier partnership succeeds to a liability of a lower-tier partnership, the liability in the upper-tier partnership retains the same characterization as either a qualified or a nonqualified liability that it had as a liability of the lower-tier partnership that incurred the liability. Moreover, the existing regulations provide that a similar rule applies to other related party transactions involving liabilities to the extent provided by guidance in the Internal Revenue Bulletin. See for example, Rev. Rul. 2000-44, 2000-2 CB 336. The proposed regulations add additional rules regarding tiered partnerships. First, the proposed regulations clarify that the debt-financed distribution exception applies in a tiered partnership setting. Second, the proposed regulations provide rules regarding the characterization of liabilities attributable to a contributed partnership interest. Section 752(d) provides that in the case of a sale or exchange of an interest in a partnership, liabilities shall be treated in the same manner as liabilities in connection with the sale or exchange of property not associated with partnerships. Accordingly, a partner that contributes an interest in a partnership (lower-tier partnership) to another partnership (upper-tier partnership) must take into account its share of liabilities from the lower-tier partnership in applying the rules under §1.707-5. The IRS and the Treasury Department believe it is appropriate to treat the lower-tier partnership as an aggregate 14 EFTA01154604
May 12, 2026 at 8:03 AM
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EFTA01154591 | EFTA01154602 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) The remaining two types of qualified liabilities are liabilities incurred more than two years before the transfer (or written agreement to transfer), and liabilities incurred within two years of the transfer (or written agreement to transfer) but not in anticipation of the transfer. Liabilities incurred by a partner within two years of the transfer, other than capital expenditure and ordinary course qualified liabilities, are presumed to be incurred in anticipation of the transfer unless the facts and circumstances clearly establish otherwise. With respect to both of these types of qualified liabilities, there is a requirement that the liability encumber the transferred property. The IRS and the Treasury Department believe the requirement that the liability encumber the transferred property is not necessary to carry out the purposes of section 707(a)(2)(B) when a liability was incurred in connection with the conduct of a trade or business, provided the liability was not incurred in anticipation of the transfer and all of the assets material to that trade or business are transferred to the partnership. Accordingly, the proposed regulations add an additional definition of qualified liability to account for this type of liability. As under the existing regulations regarding liabilities other than capital expenditure and ordinary course qualified liabilities, if the partner incurred the liability within two years of the transfer of assets to the partnership, (i) the liability is presumed under §1.707-5(a)(7)(i) to have been incurred in anticipation of the transfer unless the facts and circumstances clearly establish that the liability was not incurred in anticipation of the transfer, and (ii) the treatment of the liability as a qualified liability under the new definition must be disclosed to the IRS under §1.707-8. 4. Anticipated Reduction 12 EFTA01154602
May 12, 2026 at 8:03 AM
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EFTA01154591 | EFTA01154601 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (55 pgs) expenditures applies only to the extent the distribution is in reimbursement of such expenditures. Thus, the proposed regulations provide that to the extent a partner funded a capital expenditure through a borrowing and economic responsibility for that borrowing has shifted to another partner, the exception for preformation capital expenditures should not apply because there is no outlay by the partner to reimburse. 3. Qualified Liabilities in a Trade or Business As previously mentioned, the existing regulations generally exclude qualified liabilities from disguised sale treatment. The legislative history of section 707(a)(2)(B) with respect to liabilities provides that Congress was "concerned with transactions that attempt to disguise a sale of property and not with non-abusive transactions that reflect the various economic contributions of the partners.... For example...the transaction will be treated as a sale or exchange of property...to the extent the partner has received a loan related to the property in anticipation of the transaction and responsibility for repayment of the loan is transferred to the other partners." See H.R. Rep. No. 432, pt. 2, 981h Cong. 2nd Sess. 1216, 1220-1221 (1984). The existing regulations under §1.707-5(a)(6) provide four types of liabilities that are qualified liabilities. In addition to the capital expenditure qualified liabilities discussed previously, the existing regulations include as a qualified liability a liability incurred in the ordinary course of the trade or business in which property transferred to the partnership was used or held, but only if all of the assets that are material to that trade or business are transferred to the partnership ("ordinary course qualified liability"). There is no requirement that these two types of liabilities encumber the transferred property to be treated as qualified liabilities. II EFTA01154601 Epstein Web iOS app on the App Store.
May 12, 2026 at 8:03 AM
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EFTA01154591 | EFTA01154599 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) market value of such property at the time of the contribution." This fair market value limitation, however, does not apply if the fair market value of the contributed property does not exceed 120 percent of the partner's adjusted basis in the contributed property at the time of the contribution. The references to "such property" and "contributed property" in §1.707-4(d) are intended to refer to the single property for which the expenditures were made. Accordingly, in the case of multiple property contributions, the proposed regulations provide that the determination of whether the fair market value limitation and the exception to the fair market value limitation apply to reimbursements of capital expenditures is made separately for each property that qualifies for the exception. Second, the proposed regulations clarify the scope of the term "capital expenditures" for purposes of H1.707-4 and 1.707-5. For purposes of §§1.707-4 and 1.707-5, the term "capital expenditures" has the same meaning as the term "capital expenditures" has under the Code and applicable regulations, except that it includes capital expenditures taxpayers elect to deduct, and does not include deductible expenses taxpayers elect to treat as capital expenditures. The IRS and the Treasury Department are aware that taxpayers are uncertain whether the term capital expenditures includes only expenditures that are required to be capitalized under the Code. The purpose of the exception for preformation capital expenditures is to permit a partnership to reimburse a contributing partner for expenditures incurred with respect to contributed property. The IRS and the Treasury Department considered whether a contributing partner's capital expenditures for this purpose should be reduced by the benefit of the tax deduction the contributing partner received prior to contribution of the EFTA01154599
May 12, 2026 at 8:03 AM
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EFTA01154591 | EFTA01154598 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) In addition, the IRS and the Treasury Department are aware that there is uncertainty as to whether, for purposes of §1.707-5(b)(2), the amount of money transferred to a partner that is traceable to a partnership liability is reduced by any portion of such amount that is also excluded from disguised sale treatment under one or more of the exceptions in §1.707-4 (for example, because the transfer of money is also properly treated as a reasonable guaranteed payment). The IRS and the Treasury Department believe that the treatment of a transfer should first be determined under the debt-financed distribution exception, and any amount not excluded from §1.707-3 under the debt-financed distribution exception should be tested to see if such amount would be excluded from §1.707-3 under a different exception in §1.707-4. This ordering rule ensures that the application of one of the exceptions in §1.707-4 does not minimize the application of the debt-financed distribution exception. 2. Preformation Expenditures Section 1.707-4(d) of the existing regulations provides an additional exception for reimbursements of preformation expenditures to the general rule in §1.707-3. Under §1.707-4(d), transfers to reimburse a partner for certain capital expenditures and costs incurred are not treated as part of a sale of property under §1.707-3 (the "exception for preformation capital expenditures"). The proposed regulations amend the exception for preformation capital expenditures to address three issues. First, the proposed regulations provide how the exception for preformation capital expenditures applies in the case of multiple property transfers. The exception for preformation capital expenditures generally applies only to the extent that "the reimbursed capital expenditures do not exceed 20 percent of the fair EFTA01154598
May 12, 2026 at 8:03 AM
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EFTA01154591 | EFTA01154597 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) the partner to the partnership if, based on all the facts and circumstances, the transfer of money or other consideration would not have been made but for the transfer of the property and, for non-simultaneous transfers, the subsequent transfer is not dependent on the entrepreneurial risks of the partnership. Notwithstanding this general rule, the existing regulations provide several exceptions. One such exception in §1.707-5(b) of the existing regulations generally provides that a distribution of money to a partner is not taken into account for purposes of §1.707-3 to the extent the distribution is traceable to a partnership borrowing and the amount of the distribution does not exceed the partner's allocable share of the liability incurred to fund the distribution (the "debt-financed distribution exception"). Under a special rule in the existing regulations, if a partnership transfers to more than one partner pursuant to a plan all or a portion of the proceeds of one or more liabilities, the debt-financed distribution exception is applied by treating all of the liabilities incurred pursuant to the plan as one liability. Thus, partners who are allocated shares of multiple liabilities are treated as being allocated a share of a single liability, to which any distributee partner's distribution of debt proceeds relates, rather than a share of each separate liability. To illustrate the application of this rule, the proposed regulations add an example to the existing regulations to demonstrate that if more than one partner receives all or a portion of the debt proceeds of multiple liabilities that are treated as a single liability under the special rule, the debt proceeds will not be treated as consideration in a disguised sale to the extent of the partner's allocable share of the single liability. EFTA01154597
May 12, 2026 at 8:03 AM
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EFTA01154591 | EFTA01154596 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) relating to disguised sales of property. The IRS and the Treasury Department noted in the preamble to those proposed regulations an awareness of certain deficiencies and technical ambiguities in the existing regulations under §§1.707-3, 1.707-4, and 1.707-5, and requested comments on the scope and content of revisions to the existing regulations, but received none. The notice of proposed rulemaking was subsequently withdrawn on January 21, 2009, in Announcement 2009-4, 2009-1 CB 597. The IRS and the Treasury Department have, however, continued to study these issues, and set forth in the following section is a discussion of those areas in the existing regulations that the IRS and the Treasury Department have identified as requiring clarification or revision and the proposed changes to those areas. In addition, regulations under section 752 address the treatment of partnership recourse and nonrecourse liabilities. The IRS and the Treasury Department believe it is appropriate to reconsider the rules under section 752 regarding the payment obligations that are recognized under §1.752-2(b)(3), the satisfaction of payment obligations under §1.752-2(b)(6), and the methods available for allocating excess nonrecourse liabilities under §1.752-3(a)(3). Also discussed in the following section is an explanation of those areas in the section 752 regulations that the IRS and the Treasury Department have identified as requiring revision and the proposed changes to those areas. Explanation of Provisions 1. Debt-Financed Distributions Section 1.707-3 of the existing regulations generally provides that a transfer of property by a partner to a partnership followed by a transfer of money or other consideration from the partnership to the partner will be treated as a sale of property by EFTA01154596 Epstein Web iOS app on the App Store.
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EFTA01154591 | EFTA01154594 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) How the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of service to provide information. The collection of information in this proposed regulation is in §1.7522(b)(3)(iii)(C). This information is required to ensure proper allocations of partnership liabilities. This information will be used to determine the extent to which certain partners or related persons bear the economic risk of loss with respect to partnership liabilities. The collection of information is mandatory. The likely reporters are small and large businesses or organizations and trusts. Estimated total annual reporting burden: 8 million hours. The estimated annual burden per respondent varies from 6 minutes to 2 hours, depending on individual circumstances, with an estimated average of 1 hour. Estimated number of respondents: 8 million. Estimated frequency of responses: On occasion. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103. EFTA01154594
May 12, 2026 at 8:03 AM
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EFTA01154591 | EFTA01154593 taxanalysts DOCUMENT SERVICE Doc 2014 1995 (SS pgs) presumed to be anticipated) and §1.707-5(a)(7)(ii) (regarding a liability incurred within two years prior to a transfer of property). This information is required by the IRS to ensure that sections 707(a)(2)(B) and 752 of the Code and applicable regulations are properly applied respectively either to transfers between a partner and a partnership or for allocations of partnership liabilities. The respondents will be partners and partnerships. The collection of information in these proposed regulations under section 752 has been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by March 31, 2014. Comments are specifically requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the Internal Revenue Service, including whether the information will have practical utility; The accuracy of the estimated burden associated with the proposed collection of information (see below); How the quality, utility, and clarity of the information to be collected may be enhanced; EFTA01154593
May 12, 2026 at 8:03 AM
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EFTA00602757 | EFTA00602760 taxanalysts° DOCUMENT SERVICE VICpgs) Doc 2013 19374 (7 National Business Aviation Association Recommendations for 2013.2014 Guidance Priority List (Notice 2013-22) Treatment of teasing Activity Uncles* I.R.C. § 280f(b) May 1, 2013 Page 4 of 4 For example, based on the TAM, if two employees (who are not 5-percent owners or related parties of the employer) travel on an aircraft leased by the employer from a related party on the business of their employer, such use is qualified business use. However, If the same two employees traveling on the leased aircraft for the same business purpose happen to be 5-percent owners of the employer, such use would not be qualified business use for purposes of § 280F. Conversely. if the aircraft is owned by the employer (and not leased from a related party) the business use of the two employees (whether they are 5-percent owners or not) is qualified business use for purposes of § 280F. As can be seen by this example, it is arbtrary to distinguish what is qualified business use simply by who is on board (i.e., 5percent owners or not) and whether the aircraft is leased from a related party or not. The business use of the leased aircraft s the same in any variations of the example described above and, thus should be treated the same for purposes of § 280F. This conclusion that the qualified business use percentage of property leased to a 5-percent owner or related party should be determined based on the lessee's use of the property is consistent with the general rule discussed above that the depreciation life and method for leased property is determined based on the lessee's use of the property.° The language of § 280F(d)(6)(C) does not compel the conclusion that all leasing to a 5-percent owner or related party (when the passengers are 5-percent owners or related parties) must be treated as 0-percent qualified business use. The statute is efficiently written to only exclude the activity of leasing' from qualified business use. The statute does not go further In explaining how to measure qualified business use on the flights of a leased a,rcraft, but the statute should not have to do that. The appropriate lest is already set forth In the statute for distinguishing business use from personal use. Requested Guidance According'y, we respectfully request that the Service Provide guidance clarifying that business use of an aircraft by a lessee, who is a 5-percent owner or related party of the lessor of the aircraft, is qualified business use for purposes of I.R.C. § 280F. We would appreciate the opportunity to discuss this issue with the IRS and Treasury. Please contact me at (202) 753-9451 or sobrienambaa.orq if you have any questions or if you would like any additional information. Thank you in advance for your cons deration of this request. Sincerely, j ar!, els., Scott O'Brien Senior Manager, Finance 8 Tax Policy Enclosures: 2 9 Treas. Reg. § .167(a)-11(e)(3)(ili). EFTA00602760
May 4, 2026 at 12:23 PM
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