Partnerships often use property owned by or contributed by partners. Valid compensation strategies in such instances require careful advance planning to avoid the disguised sales rules created by Congress and the IRS to correct abuses in this area. Professor Richard W. Harris walks practitioners through the potential minefields of IRC §§ 707(a), 707(c), and 702(a) with numerous examples and sample calculations that show how to avoid problems. This article from a recent issue of CCH’s Journal of Passthrough Entities, covers payments, preferential distributive shares and disguised sales of property. Harris outlines strategies for avoiding the disguised sale rules and looks at what fits under the definition of “reasonable” compensation.
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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.
Read this article from CCH’s Journal of Taxation of Financial Products.