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Course Details

Partnership Taxation (Course Id 325)

Updated / QAS / Registry / EA
  Add to Cart 
Author : Danny C Santucci, JD
Course Length : Pages: 0 ||| Review Questions: 0 ||| Final Exam Questions: 120
CPE Credits : 24.0
IRS Credits : 24
Price : $145.95
Passing Score : 70%
Course Type: NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents
Technical Designation: Technical
Primary Subject-Field Of Study:

Taxes - Taxes for Course Id 325

Description :

The program will examine tax issues relating to the formation and operation of partnerships. Participants will gain familiarity with basic areas of partnership taxation so as to recognize a problem and have at hand some practical knowledge for its solution. This course is presented in four practical segments: (1) the formation of partnerships, (2) the basic day-to-day operations of partnerships, (3) the distributions of assets to partners, and (4) the termination of partnership affairs.

Usage Rank : 17059
Release : 2023
Version : 1.0
Prerequisites : General understanding of federal income taxation.
Experience Level : Overview
Additional Contents : Complete, no additional material needed.
Additional Links :
Advance Preparation : None.
Delivery Method : QAS Self Study
Intended Participants : Anyone needing Continuing Professional Education (CPE).
Revision Date : 08-Dec-2023
NASBA Course Declaration : Participants must complete the final examination within one year of purchase and with a minimum passing grade of 70% or better to receive CPE credit unless otherwise noted on the Course History page (i.e. California Ethics must score 90% or better). After logging in click on the Course History links on your My Courses page for the Begin date and Expire date for the Final Exam.
Approved Audience :

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 325

Keywords : Taxes, Partnership, Taxation, cpe, cpa, online course
Learning Objectives :

As a result of studying each assignment, you should be able to meet the objectives listed below each assignment.

Chapter 1                Introduction

       At the start of Chapter 1, participants should identify the following topics for study:

    * Section 761(a)
    * Husband-wife partnerships
    * Limited partnerships
    * Co-tenancies & joint ventures
    * Partnership agreements
    * Family partnerships
    * Publicly traded partnerships
    * Advantages & disadvantages
    * Complete & partial exclusion elections
    * Loss & year limitations
Learning Objectives:

       After reading Chapter 1, participants will be able to:
    1. Determine what constitutes a partnership for federal income tax purposes under §761(a) by:
      a. Recognizing factors for partnership existence identifying co-tenancy status, husband-wife partnerships, and the correct reporting of income and loss;
      b. Identifying the liability of general and limited partners including how such liability might be contained; and
      c. Specifying the factors previously used to determine whether a business was a corporation or a partnership and the factors of the current check-the-box regulations.
    2. Recognize the impact of partnership agreements on partners’ shares of tax items, specify the requirements of §704(e) for family partnerships, and cite the pros and cons of partnerships to determine when the entity choice is appropriate.
    3. Identify the complete or partial exclusion from partnership treatment under §761.
Chapter 2                Partnership Income

       At the start of Chapter 2, participants should identify the following topics for study:

    * Partners taxed as individuals
    * Separately treated items
    * Deduction of losses
    * Partnership tax return
    * Special allocations
    * Limitations on the choice of a taxable year
    * Closing of the partnership tax year
    * Treating partner as a stranger
    * Guaranteed payments
    * Certain losses disallowed & sales at a gain
Learning Objectives:

       After reading Chapter 2, participants will be able to:
    1. Recognize the allocation of income and deduction among partners, identify when a partnership or its partners are subject to income or estimated tax, determine what constitutes §1402 self-employment taxes, and specify instances where partnerships are viewed as separate entities.
    2. Specify the types of separately stated partnership expenses identifying the character of such items and their deduction limitations, and recognize the §704(d) outside basis limitation and its impact on losses.
    3. Determine whether a partnership can elect to amortize certain business-related expenses, and specify the elements and requirements of the partnership tax return and the items of deduction to which individuals are entitled.
    4. Identify a partnership’s year taxable under §706(a) and the allocation of items of income and deduction from the partnership to the partners by:
      a. Specifying instances when a partnership generally must conform its tax year to its partners’ tax years and the least aggregate deferral of income for each partner whose tax year is different from other partners;
      b. Recognizing the availability of the natural business year including the §444 election as it relates to a partnership’s tax year identifying its costs and/or benefits; and
      c. Determining tax year termination and non-termination events for a partnership.
    5. Identify transactions between a partner and a partnership as being between a stranger and a partnership or as guaranteed payments.
Chapter 3                Contributions to Partnerships

       At the start of Chapter 3, participants should identify the following topics for study:

    * Contribution vs. sale or exchange
    * Precontribution gain or loss property
    * Allocations as to contributed property
    * Character of subsequent gain or loss
    * Contribution of services
    * Original and adjusted basis of partner’s interest
    * Effect of liabilities on outside basis
    * Partner’s share of partnership liabilities
    * At-risk rule
    * Passive losses
Learning Objectives:

       After reading Chapter 3, participants will be able to:
    1. Recognize the tax-free capitalization rules of §721 by:
      a. Specifying the differences between a contribution and a sale or exchange recognizing the treatment of transfers to investment company type partnerships; and
      b. Identifying when the property taint rules apply and methods of allocation for precontribution gain or loss.
    2. Determine a partnership’s basis for contributed assets under §723.
    3. Specify the taxation of contributed services and strategies to avoid immediate taxation.
    4. Determine the original and adjusted basis of an interest acquired by contributing property and/or money under §722.
    5. Recognize a partner’s loss deduction when the limits on deductions of partnership losses apply by:
      a. Determining amounts at risk under §465; and
      b. Specifying the buckets of income under §469 identifying the impact of passive loss rules.
Chapter 4                Sales & Exchanges of Partnership Interests

       At the start of Chapter 4, participants should identify the following topics for study:

    * Corn Product Rule
    * Importance of capital treatment
    * Regulations on the gain on sale of pass-through entities
    * Exchanges & transfers
    * Unrealized receivables
    * Inventory
    * Liabilities of partnership
    * Inside basis after transfer of a partnership interest
    * Gifts
    * Abandonment or forfeiture
Learning Objectives:

       After reading Chapter 4, participants will be able to:
    1. Determine capital asset treatment on the sale or disposition of a partnership interest under §741 by:
      a. Recognizing whether the Corn Products Rule applies and the reasoning behind the determination;
      b. Specifying the reasons why capital treatment is important and recognizing the impact of capital gain regulations on sales or exchanges of partnership interests; and
      c. Identifying the tax consequences of exchanges and transfers, and specifying partnership incorporation methods.
    2. Recognize the tax treatment of a sale or exchange of a partnership interest where the partnership possesses hot assets (unrealized receivables and inventory), and identify the impact of partnership liabilities in computing both the amount realized on a sale of a partner’s interest and the adjusted basis of the sold interest.
    3. Specify optional basis adjustment provisions stating how they relate to the general rule for the inside basis after the transfer of a partnership interest, determine the tax consequences of making a gift of a partnership interest, and recognize the unique treatment of partnership interests that are abandoned or foreclosed on with or without related liabilities.
Chapter 5                Partnership Distributions

       At the start of Chapter 5, participants should identify the following topics for study:

    * General nonrecognition rule
    * Exceptions to the general nonrecognition rule
    * Partner’s interest
    * Nonliquidating & liquidating distributions
    * Special adjustment to basis & mandatory application
    * Holding period
    * Partnership property
    * Proportionate distributions
    * Disproportionate distributions
    * Effect of distributions of receivables or inventory
Learning Objectives:

       After reading Chapter 5, participants will be able to:
    1. Determine the treatment of distributions of cash or property by a partnership to the partners by:
      a. Recognizing the general nonrecognition rule under §731 and specifying exceptions to this general rule;
      b. Identifying a partner’s basis on either a liquidating or a non-liquidating distribution under §§732 and 733, and specifying instances when a partner may choose a special basis adjustment when receiving a distribution of property other than cash influences how the partner’s basis is determined; and
      c. Recognizing the tax consequences associated with proportionate and disproportionate distributions, particularly the effect of distributions of receivables or inventory.
Chapter 6                Partnership Liquidations

       At the start of Chapter 6, participants should identify the following topics for study:

    * Flexible treatment of partnership liquidations
    * Types of liquidating distributions
    * Section 736(a) payments
    * Section 736(b) payments
    * Distributions of unrealized receivables or inventory
    * Basis of distributed property
    * Gain or loss recognition
    * Basis adjustment after distributions
    * Election - §754
    * Additional adjustments required by §754
Learning Objectives:

       After reading Chapter 6, participants will be able to:
    1. Determine ways to liquidate a retiring partner’s interest by:
      a. Recognizing the types of liquidating distributions and specifying the character and treatment of cash distributions under §736; and
      b. Identifying the tax treatment of property distributions in liquidation permitting partnerships to distribute unrealized receivables or inventory.
    2. Identify a withdrawing partner’s basis when there are distributions in liquidation or in nonliquidation, and specify the requirements of a §754 election identifying additional adjustments required.
Chapter 7                Limited Liability Companies

       At the start of Chapter 7, participants should identify the following topics for study:

    * Benefits of LLCs
    * Advantages of LLCs over C corporations
    * Advantages of LLCs over S corporations
    * Advantages of LLCs over limited partnerships
    * Advantages of LLCs over general partnerships
    * Disadvantages of LLCs
    * Uses
    * Federal tax consequences
    * Converting to an LLC from another form of entity
    * Local taxes on conversion
Learning Objectives:

       After reading Chapter 7, participants will be able to:
    1. Determine the taxation of limited liability companies recognizing the variety of tax entity choices and their advantages and disadvantages by:
      a. Specifying the advantages and disadvantages of an LLC recognizing the advantages of LLCs over C corporations;
      b. Identifying the advantages that LLCs have over S corporations and the differences between an LLC and a limited partnership; and
      c. Cite the drawbacks of LLCs and their bearing on entity choice.
    2. Identify ways to use an LLC and their business-planning opportunities, and specify business ventures that should avoid LLCs.
    3. Recognize the federal tax consequences of establishing an LLC by:
      a. Determining the role of check-the-box regulations in the entity characterization and identifying self-employment tax regulations and their application to LLC members;
      b. Specifying whether an LLC member is at risk for recourse debt and determine the treatment of debt discharge income on an LLC;
      c. Identifying the passive loss rules and their association with LLCs and selecting an appropriate method of accounting for an LLC based on its characterization; and
      d. Determining how an LLC can designate a tax matters partner for audit purposes.
    4. Identify the dangers and tax consequences in converting to an LLC from another form of entity, and recognize the potential assessment of sales and use tax, real property taxes, and real property transfer taxes on entities on conversion to an LLC.
Course Contents :

Chapter 1 - Introduction

Definition of Partnership

Section 761(a)


Husband-Wife Partnerships

Election for Husband & Wife Unincorporated Businesses

Qualified Joint Venture

Making the Election


Limited Partnerships

Taxed as corporations



Centralized management


Limited Liability

Ruling Policies

Corporate General Partner

Tax Shelters

Check-the-Box Regulations


Definition of Trade or Business

Joint Ventures

Investment Clubs

Partnership Agreement


Partner’s Share of Tax Items

Limited Partners

Family Partnerships - §704(e)

Capital Partnerships

Gifts & Interfamily Sales

Bipartisan Budget Act of 2015

Material Use of Capital

Minor Children as Partners

Non-Capital Partnerships

Publicly Traded Partnerships - §7704




Exclusion from Partnership Treatment - §761

Complete Exclusion Election

Partial Exclusion Election

Loss & Year Limitations

Changing the Choice

Chapter 2 - Partnership Income

Partners Taxed as Individuals

Self-Employment Tax

Proposed Amendments to Limited Partner Regs


Exception - Separate Entity for Some Purposes

Individual Returns & K-1s

Partnership Expenses Paid By a Partner

Separately Treated Items

Character of Items & Limitations

Deduction of Losses

Outside Basis Limitation - §704(d)

Loss Ultimately Deductible

Effect of Losses on Outside Basis - §705

Partnership Tax Return

Organization & Syndication Fees - §709

Capitalized Syndication Fees

Business Start-up Costs - §195


Filing Requirements

Due Date of Return

Failure to File

Failure to Furnish Copies to Partners

Special Allocations - §704(b)

Economic Effect

“Substantial Effect”

Year Taxable - §706(a)

Limitation on Choice of Taxable Year

Required Tax Year

Business Purpose - §706(b)

Rev. Proc. 87-32

Highest Average Requirement

47-Month Exclusion


Form 1128

Section 444 Election

Limitations on Changing a Tax Year

Making the Election - Form 8716

Back-Up Election

Required Payment

When to File

Termination of Election

Closing of Partnership Year

Events That Terminate Partnership - §708(b)

Discontinuance of Business

Winding Up

Sale of 50% or More Interest Technical Termination Repealed

Events That Do Not Close the Year - §706(c)

Sale of Individual Partner’s Interest

Death of Partner

Buy/Sell Exception

Change for Closing of Partnership Taxable Year

Admission of New Partners - §706(d)

Allocation Techniques

Daily Allocation Required for Cash Items

Transactions Between Partner and Partnership

Treating Partner as Stranger - §707(a)

Payments by Accrual Basis Partnership to Cash Basis Partner

Guaranteed Payments - §707(c)


Prepaid & Capital Expenses - §707(c)

Organization & Syndication Expenses - §709

Guaranteed Minimum

Year Taxed - §706(a)

Salary vs. Distribution

Stranger Payment vs. Guaranteed Payment

Payments Resulting in Loss

Recipient of Salary as an “Employee”


Accident & Health Insurance Premiums

Certain Losses Disallowed - §707(b)

Two Partnerships

Constructive Ownership

Sales at Gain

Chapter 3 - Contributions to Partnerships

Contributions of Property - §721

Contribution vs. Sale or Exchange

Disguised Sale - §707(a)

Disguised Taxable Exchanges - §704 & §737

Precontribution Gain or Loss Property

Property Distribution to Contributing Partner - §737

Anti-Abuse Rules Under §737

Contributed Property Distribution to Another Partner - §704(c)

Seven-Year Period (Formerly Five)

Allocation Methods for Precontribution Gain or Loss

Transfers to Investment Company Type Partnerships - §721(b)

Contributed Assets Inside (Partnership) Basis - §723

Allocations as to Contributed Property - §704(c)


Earlier Optional Application of §704(c)

Character of Subsequent Gain

Taint On Contribution - §724

Character of Subsequent Loss - §724(c)

Contribution of Services

Basis of Partner’s Interest - Outside Basis

Original Basis - §722

Adjustments to Basis

Effect of Liabilities - §752

Deemed Distribution & Contribution

Special Rule for Liabilities of Cash Basis Partnership

Partner’s Share of Partnership Liabilities

Limited partnerships



Limits on Deduction of Partnership Losses

At-Risk Rule - §465


Exception for Real Estate Loans

Qualified Persons

Definition of Amounts At-Risk

Passive Losses - §469

Three Buckets

Material Participation



Suspended Losses

Fully Taxable Disposition

Rental Real Estate Losses

Application to Corporations

Chapter 4 - Sales & Exchanges of Partnership Interests

Capital Asset Treatment - §741

Corn Products Rule

Importance of Capital Treatment

Regs on Gain on Sale of Passthrough Entities - §1(H)

Exchanges & Transfers

Like-Kind Exchanges - §1031

Transfers to Controlled Corporations - §351

Partner’s Interest Basis

Incorporation Methods

Hot Assets - §751

Unrealized Receivables

Depreciation Recapture


“Inventory Items”

“Substantial Appreciation”

Elimination of Substantial Requirement

Basis of §751 Property

Tax Reporting & Notification


Liabilities of Partnership

Inside Basis after Transfer of Partnership Interest

General Rule - §743(a)

Special Inside Basis Adjustment - §754 & §743(b)

Allocation of Basis - §755

Death of Partner

Basis Exception

Permanency of Election



Abandonment or Forfeiture

Chapter 5 - Partnership Distributions

General Nonrecognition Rule - §731

Exceptions to General Rule

Basis Adjustments

Partner’s Interest - §733

Property Received - §732

Nonliquidating Distribution

Basis Limitation - §732(a)

Liquidating or Complete Distribution

Allocation of Basis When Limited - §732(c)

Partnership’s Basis Greater Than Partner’s Basis

Partner’s Basis Greater Than Partnership’s Basis

Special Adjustment to Basis

Mandatory Application

Holding Period - §735

Partnership Property - §754 & §734

Basis Allocation on Properties Distributed By a Partnership

Distributions of Receivables or Inventory

Proportionate Distributions

Subsequent Disposition Rule

Disproportionate Distribution - §751(b)

Asset Allocation

Gain or Loss

Upon Distribution

On Subsequent Sale

Basis for Property Received in Disproportionate Distribution



Chapter 6 - Partnership Liquidations

Flexible Treatment

Types of Liquidating Distributions

Liquidating Distributions of Money

Section 736(a) Payments

Section 736(b) Payments


Exclusions From §736(b) Treatment


Series of Payments

Contingent Payments

Distributions of Property in Liquidation

Distributions of Unrealized Receivables or Inventory

Liquidating Disproportionate Distributions

Basis of Distributed Property

Gain or Loss Recognition

Basis Adjustment after Distributions

Election - §754

Additional Adjustments Required by §734

Chapter 7 - Limited Liability Companies


Check-the-Box Regulations

LLC Benefits

Advantages of LLCs over C Corporation

Double Tax

Basis Adjustment

Special Allocations



Unreasonable Compensation

Non-Tax Benefits

Advantages of LLCs over S Corporations

Advantages of LLCs over Limited Partnerships

Outside Basis & Debt Share Advantage

Substantial Economic Effect Rules - §704(b)

Discharge of Indebtedness Income

Advantages of LLCs over General Partnerships



Professional Firms

Venture Capitalists

Leveraged Buyouts - LBO

Joint Venture

Corporations Filing Consolidated Returns

Foreign Investment

Real Estate Ventures

Charitable Investment

Estate Planning

Problem Uses

Federal Tax Consequences

Check-the-Box Regulations

Self-Employment Tax

Proposed Amendments to Limited Partner Regs - §1402


At-Risk Rules - §465

Debt Discharge Income

Passive Loss Rules - §469

Method of Accounting

Audit Procedures


Tax Matters Partner (TMP)


Additional Rules & Rights

Bipartisan Budget Act of 2015 Centralized System

Conversion of Partnership to LLC

Conversion of S Corporation to LLC

Conversion of C Corporation to LLC

Local Taxes on Conversion

Sales & Use Tax

Real Property Taxes

Real Property Transfer Taxes

Entity Comparison



CPE Taxes Course: https://www.cpethink.com/tax-cpa-courses
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