Allocation confusion for partnership deficit capital accounts

Article Abstract:

The Tax Court's contrasting decisions in 'Vecchio' and 'Interhotel Co Ltd' have further complicated the allocation of partnership deficit capital accounts governed by the lengthy and confusing IRS Regulations under Section 704(b). In the first case, the Tax Court ruled that the income had to be allocated to the taxpayer with the deficit capital account while in the second, it held that the income could not be allocated to the partner with the deficit capital account. Under Section 701, a partnership is not subject to income taxation. It is the partners who are taxed in their individual capacity and they separately take into account a distributive share of the partnership's income, gain, loss and deduction under Section 702(a). The IRS should revise its Regulations to rectify this confusion arising from the allocation of partnership income, gain, loss and deduction.

Tax Law, Public Finance Activities, Corporate Tax Deductions & Exemptions, Partnerships, Corporate Income Taxes, Corporate taxes, Capital assets, Tax deductions, Partnership, Recognition of gain or loss (Taxation), Recognized gain or loss (Taxation), Allocation (Taxation), Tax allocation

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Recent changes to qualified plans amplified in Temporary Regulations

Article Abstract:

The Proposed and Temporary Regulations recently released make some issues and effective dates under the employee benefit provisions of the Deficit Reduction Act of 1984 more clear. Among the factors discussed are annuities, group-term insurance, cafeteria plans, partial distributions, self-employed individuals, deferred benefits, employee stock ownership plans, the relationship between economic performance and the regulations, and estate tax exclusion.

Interpretation and construction, Planning, Tax administration and procedure, Tax administration, Tax planning, Retirement income, Legislation, Legislative process

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