University of San Francisco School of Law
Taxation of Partnerships (Law 884)
Syllabus
Spring 2016 (Mondays 6:00 pm – 8:50 pm, except as noted)
Instructor: James M. Lowy (jamesmlowy@gmail.com) (415-381-2984)
Course Description
A great number of businesses utilize the partnership structure, including closely-held operating
businesses, most investment entities, including private equity, venture capital, real estate and
hedge funds, and publicly-traded master limited partnerships. This course constitutes a study of
the Federal income tax treatment of partnerships and partners (including entities classified as
partnerships). The issues to be addressed include the treatment of contributions to and distributions
from partnerships, the manner in which income and loss items can be allocated among the partners,
the treatment of transfers of partnership interests, the taxation of service partners (including the
treatment of carried interests), terminations, sharing of liabilities and special basis adjustments.
Text books:
Cunningham & Cunningham, The Logic of Subchapter K ((West 4th Ed.) (“Cunningham”)
Cunningham & Cunningham, Learning The Logic Of Subchapter K – Problems and Assignments
for a Course in the Taxation of Partnerships (West) (“Problems”)
Bank & Stark, Corporate and Partnership Income Tax Code and Regulations (Foundation Press
2014-2015 Edition) (or alternative access to Internal Revenue Code and Treasury Regulations)
Problems to be distributed in class.
Notes:
(1) Final exam will be “open book” although computer/smart phone access to materials will
not be permitted. Accordingly, access to hard copy of Code/Regulations is
recommended.
(2) Grades may be adjusted positively for class participation and negatively for significant
attendance issues.
(3) February 29 class needs to be rescheduled –hopefully, March 1-4.
CLASS
TOPICS AND READINGS
The class material is divided into modules. It is intended that discussion of each module will
begin on the corresponding date stated below although many of the modules will spill over
to the following class.
1. January 11
Introduction to Subchapter K; Choice of Entity; Entity Classification; What is a
Partnership; Entity vs. Aggregate; Brief Discussion of Issues Not Covered
Read Internal Revenue Code (“IRC”) §§ 761(a) and (b), 704(e)(1)
Read Treas. Regs. §§ 1.761-1(a) through (c); 1.761-2(a); 301.7701-1; 301.77012(a), (2)(c)(1), (2)(c)(2); 301.7701-3(a), (3)(b)(1)
Read Cases: Culbertson, 337 U.S. 733 (1949); Luna, 42 T.C. 1067 (1964) [you may
skip “Findings of Fact” in Luna]; Madison Gas & Electric Co., 633 F.2d 512 (7th
Cir. 1980). (Textbook does not contain case opinions; accordingly, please access
via one of the electronic services.)
Read Text: Cunningham, Chapter 1
Review Problems: Chapter 1
January 18
NO CLASS (MLK DAY)
2. January 25
Contributions of Property; Basis; Holding Period; Treatment of Liabilities;
Investment Companies
Code §§ 721 -724, 709, 752, 351(e), 705, 1223(1) & (2)
Treas. Regs. §§ 1.721-1, 1.351-1(c); 1.722-1, 1.723-1, 1.752-1, 1.705-1(a),
1.1223-3
Read Text: Cunningham, Chapter 2
Review Problems: Chapter 2
3. February 1
Calculation of Income; Allocations; Varying Interests; [Guaranteed Payments;]
Capital Account Concepts; Introduction to Substantial Economic Effect
Code § 701, 702, 703, 706(a), 704(a), (b), (d), [707(a), 707(c)]
Treas. Regs. §§ 1.702-1; 1.703-1; 1.704-1(b)(2)(iv); [1.707-1]
Read Text: Cunningham, Chapter 3 and Chapter 4
Review Problems: Chapter 3, Part B
Chapter 10, Part C
Chapter 4, Problems 1 & 2
4. February 8
Allocations - Substantial Economic Effect
Code § 704(b)
Treas. Regs. §§ 1.704-1(a) through 1.704-1(b)(2)(iii)(c); 1.704-1(b)(4)(vi) and (vii);
1.704-1(b)(5) Examples 5 - 7
Read Text: Cunningham, Chapter 5
Review Problems: Chapter 5
5. February 16 (Tues)
Allocations of Nonrecourse Deductions; Partners’ Interests in the Partnership;
Targeted Allocations
Treas. Regs. §§ 1.704-2, 1.704-1(b)(3)
Read Text: Cunningham, Chapter 6
Review Problem: Chapter 6
6. February 22
Section 704(c); Mixing Bowl Provisions (Sections 704(c)(1)(B) & 737)
Code §§ 704(c), 737
Treas. Regs. §§ 1.704-3, 1.704-4, 1.737-1
Read Text: Cunningham, Chapter 7
Review Problems: Chapter 7
Chapter 15, Problem 5
7. February 29? [TBD] Continuation of Prior Material; Allocation Problems (Distributed)
March 7 – SPRING BREAK (Yay!)
8. March 14
Allocation of Liabilities
Code § 752
Treas. Regs. § 1.752-2 through 1.752-4
Cases: IPO II (122 TC 295 (2004)); Canal Corp. (135 TC 199 (2010))
Text: Cunningham, Chapter 8
Review Problems: Chapter 8
9. March 21
Distributions; Section 751(b); Retirement
Code §§ 731, 732, 733, 751(b), 736
Treas. Regs. §§ 1.731-1, 1.732-1, 1.751-1, 1.736-1
Read Text: Cunningham, Chapter 11, Chapter 13 and Chapter 14
Review Problems: Chapter 11
Chapter 13
Chapter 14, Part B
10. March 28
Disguised Sales of Property By Partners and By Partnerships; Disguised Sale of
Partnership Interests
Code § 707(a)(2), 731(a)
Treas Regs. §§ 1.707-3 through 1.707-6
Read Text: Cunningham, Chapter 9 (through page 137) and Chapter 15
Review Problems: Chapter 9, Part A
Chapter 15, Part A and Part B.1
11. April 4
Disguised Fees; Receipt of Interests in Exchange for Services, Including Carried
Interests
Treas. Regs. 1.721-1
Prop. Treas. Regs. §§1.721-1(b), 1.83-3
Read Text: Cunningham, Pages 138-143
Review Problems: Chapter 9, Part B
12. April 11
Transfers of Interests; Terminations
Code §§ 741, 751(a), 708, 706(c) & (d)
Treas. Regs. § 1.751-1(a), 1.708-1(b)
Read Text: Cunningham, Chapter 10 (exclude pages 152-162)
Review Problems: Chapter 10, Part A and Part B.1
13. April 18
Basis Adjustments
Code § 734, 743, 755
Treas. Regs. §§ 1.734-1, 1.743-1, 1.755-1
Read Text: Cunningham, Chapter 10 (pages 152-162); Chapter 12
Review Problems: Chapter 10, Part B
Chapter 12
Elective Reading: Seuss, The Cat In The Hat Comes Back
14. April 25
Mergers & Divisions
Code § 708(c), (d)
Treas. Regs. §§ 1.708-1(c), (d)
FINAL
May 2, 2016