The Partnership Representative will retain broad
authority to resolve any partnership audit and any
such resolution will be binding on all partners.
The new rules could shift the tax burden of an
assessment to those persons who are partners in
the year of assessment rather than flowing through
the adjustments to the partners who recognized the
benefits in earlier years.
Considerations
Impact on partnership agreements:
• Agreement on control of audit process
• Rights of partners
The purpose of the new partnership audit procedures
is to increase tax collections, so the number of
partnership audits may rise. Existing partnership
agreements should be reviewed and amended
to address these new rules as well as choosing a
Partnership Representative.
Such decisions should be reflected in the partnership
agreements as well as offering memoranda and
subscription documents. Additionally, all purchase
and sale agreements should be carefully evaluated so
that potential partners do not bear the costs of taxes
associated with income or gain earned by partners in
prior years. n
Erik Weinapple is a director in the tax group at BPM. Contact
Erik at [email protected] or 925-296-1074.
• Allocation of adjustments
• Treatment of former partners
• Potential disincentive for certain new
entity members
BPM Real Estate Insights
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