IRS Proposes Significant Changes to Rules for Allocating Partnership Liabilities

Proposed Regulations seek to curtail perceived abuses, including the use of “bottom-dollar” guarantees and some indemnity arrangements.

On January 29, 2014, the Internal Revenue Service (IRS) proposed regulations that would significantly amend the rules under Internal Revenue Code (IRC) Section 752 relating to the allocation of partnership liabilities. In reaction to perceived abuses of leveraged partnership structures, the proposed regulations aim to prevent the use of certain guarantee and indemnity arrangements (including so-called “bottom dollar guarantees”) for tax planning purposes by imposing certain “commercially reasonable” standards and a net value requirement in order for such arrangements to be recognized under the recourse debt allocation rules. The proposed regulations also include coordinating revisions and other clarifications of the partnership disguised sales rules under IRC Section 707.

Please see full Commentary below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Latham & Watkins LLP | Attorney Advertising

Written by:


Latham & Watkins LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.