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Full-Text Articles in Law
Cobra Strikes Back: Anatomy Of A Tax Shelter, Karen C. Burke, Grayson M.P. Mccouch
Cobra Strikes Back: Anatomy Of A Tax Shelter, Karen C. Burke, Grayson M.P. Mccouch
UF Law Faculty Publications
Paul Daugerdas gained notoriety for himself and his erstwhile firm, Jenkens & Gilchrist, as the designer of a tax shelter that uses contingent liabilities to generate artificial tax losses on a grand scale. The basic shelter transaction is surprisingly simple. In essence, it uses offsetting options to inflate the basis of property that is distributed by a partnership and then contributed to and sold by another partnership, resulting in a large tax loss without any corresponding economic loss. In principle, this type of shelter could be replicated indefinitely and generate unlimited tax losses. Mr. Daugerdas is by no means unique. …
Origins And Evolution Of Section 751(B), Karen C. Burke
Origins And Evolution Of Section 751(B), Karen C. Burke
UF Law Faculty Publications
Section 751(b), reputedly one of the most widely ignored provisions of Subchapter K of the Internal Revenue Code, reserves its most daunting complexity for nonprorata current distributions of property other than cash. While partnership tax has been revolutionized by increasingly sophisticated capital-accounting rules, the 1956 regulations implementing section 751(b) have never been updated to reflect the modern concept of revaluations and section 704(c) special allocations. Recently, the Treasury Department has requested comments concerning alternative approaches that would simplify and rationalize accounting for shifts of ordinary income and capital gain among partners.
This article considers proposals to replace the imputed exchange …
Taxing Hot Asset Shifts, Karen C. Burke
Taxing Hot Asset Shifts, Karen C. Burke
UF Law Faculty Publications
The Article comments on I.R.S. Notice 2006-14 which proposes to simplify and rationalize the collapsible partnership rules of section 751(b). It concludes that the proposed hot asset sale approach represents much needed improvement of section 751(b) but suggests that the Treasury should also consider more fundamental reform that would treat a nonprorata current distribution as a partial liquidation. The Article also explores the relationship between sections 734(b) and 751(b), focusing on the 1954 ALI proposals and Professor Andrews' more recent proposals concerning hot asset distributions and mandatory basis adjustments. The Article is an outgrowth of the author's work as a …
Repairing Inside Basis Adjustments, Karen C. Burke
Repairing Inside Basis Adjustments, Karen C. Burke
UF Law Faculty Publications
Optional basis adjustments under Subchapter K have come under increased scrutiny as a result of tax shelter abuses involving partnerships. Recent legislation requires mandatory adjustments under sections 734(b) and 743(b) upon certain distributions of partnership property and transfers of partnership interests. These amendments were targeted at situations in which the failure to make such adjustments potentially gave rise to duplication of losses. While preventing loss duplication may be particularly urgent, these anti-tax-shelter measures represent a retreat from broader proposals calling for mandatory section 734(b) adjustments for both current and liquidating distributions.
In a recent article, Professor Abrams criticizes the common …
Family Limited Partnerships: Discounts, Options, And Disappearing Value, Karen C. Burke, Grayson M.P. Mccouch
Family Limited Partnerships: Discounts, Options, And Disappearing Value, Karen C. Burke, Grayson M.P. Mccouch
UF Law Faculty Publications
Family partnerships have been become increasingly popular as a means of avoiding estate and gift taxes. As other estate freezing techniques have been closed off by statutory anti-abuse rules, estate planners have increasingly resorted to partnerships as a vehicle for transferring assets within a family at deeply discounted values. Discounts ranging from one-third to over one-half of the value of the underlying assets are routinely claimed, and often allowed, based on lack of marketability and lack of control, even where these disabilities have no lasting or ascertainable economic effect. Nevertheless, the use of family partnerships to suppress value for transfer …
Exculpatory Liabilities And Partnership Nonrecourse Allocations, Karen C. Burke
Exculpatory Liabilities And Partnership Nonrecourse Allocations, Karen C. Burke
UF Law Faculty Publications
The rise of limited liability companies (LLCs) classified as partnerships for federal income tax purposes challenges traditional assumptions concerning the treatment of recourse and nonrecourse liabilities under Subchapter K. The complex rules of sections 704(b) and 752 give little attention to liabilities that are recourse to the entity under section 1001 but for which no member bears the economic risk of loss under section 752. In comparison to traditional general or limited partnerships, however, LLCs are much more likely to incur such "exculpatory" liabilities because of the limited liability shield under state law. Although exculpatory liabilities are functionally quite similar …