Section 704 B

Secondly these books are used to identify the economic substance of the deal.

Section 704 b. A effect of partnership agreement. Section 1 704 1 b 2 iv f provides that a partnership may upon the occurrence of certain events including the contribution of money to the partnership by a new or existing partner increase or decrease the partners capital accounts to reflect a revaluation of the partnership property. Allocations to partners navigating complex rules on determining validity of partnership allocations 1pm eastern 12pm central 11am mountain 10am pacific wednesday march 2 2011 today s faculty features.

This will show the partners economic interest in the business. 704 b capital accounts are intended to reflect the economic deal between the partners and allocate the related tax items according to the same deal. B determination of distributive sharea partner s distributive share of income gain loss deduction or credit or item thereof shall be determined in accordance with the partner s interest in.

704 b to prevent the shifting of tax items among partners through special allocations. B determination of distributive share. 704 b allocations704 b allocations economic dealeconomic deal sect 704 b capital accounts are intended to reflect the economicsect.

As per the defined regulations under section 704 b capital accounts are expected to be maintained as per certain rules which are not part of tax or gaap. Section 704 b books are required to be maintained because it is generally required by the tax law but you are not required to show these books on the partnership s tax return balance. 704 b 2.

A partner s distributive share of income gain loss deduction or credit shall except as otherwise provided in this chapter be determined by the partnership agreement. 704 b generally requires allocations to have substantial economic effect or to be in accordance with the partner s interest in the partnership. Section 704 b of the internal revenue code provides that a partner s distributive share of income gain loss deduction or credit is determined in accordance with the partner s interest in the partnership if the partnership agreement does not provide as to the partner s distributive shares of these items or the allocation to a partner of these items under the agreement does not have substantial economic effect.

A effect of partnership agreement. 704 b 1 the partnership agreement does not provide as to the partner s distributive share of income gain loss deduction or credit or item thereof or i r c.