Syllabus for Partnership Taxation
Professor Susan Daicoff
Fall, 1999
Office: Room 545
Tel: 614-236-6273 (Ofc)
e-mail: sdaicoff@law.capital.edu
Course Description:
856 (1201 Grad. Tax.) PARTNERSHIP TAXATION (3 hours): The meaning of partnership taxation including formation, transactions between partner and partnership, determination and treatment of partnership income and losses, sale or exchange of partnership interest, distributions, retirement, death of partner, and drafting the partnership agreement. Prerequisite: 810.
Texts and Materials:
Required:
1. Lind, Schwarz, Lathrope, & Rosenberg, Fundamentals of Partnership Taxation, 5th ed. (Foundation Press, 1998) (the "text");
2. 1999 Supplement to the text; AND either (3. & 4.) OR (5.), below:
3. Commerce Clearing House, Internal Revenue Code (June, 1999 version) (the "Code") [two volumes]; and
4. Commerce Clearing House, Income Tax Regulations (June, 1999) (the "Regs") [six volumes]; or
5. Commerce Clearing House, Federal Income Tax Code and Regulations - Selected Sections, 1999-2000 edition ("Selected Sections") [one volume] instead of the full Code and Regs.
NOTE: Masters' students may want the full Code and Regs rather than the Selected Sections.
Optional (but strongly recommended) please note: on order with the bookstore:
Laura E. Cunningham and Noel B. Cunningham, The Logic of Subchapter K, A Conceptual Guide to the Taxation of Partnerships (1996) ("Cunningham").
Hornbook please note: order on an individual basis from Warren, Gorham & Lamont (RIA):
McKee, Nelson, & Whitmire, Federal Taxation of Partnerships and Partners, Abridged Student Edition ("MN&W") and current supplement.
Course Content:
I. Overview: Introduction, Classification, and Choice of Entity
II. Formation of a Partnership
III. Operations of a Partnership: General Rules
IV. Partnership Allocations
V. Transactions Between Partners and Partnerships
NOTE: All or part of the text pages covering the above-listed subjects may be assigned.
Assignments: Class assignments will be made, in class, in the preceding week. Students are responsible for reading the text pages assigned, supplement pages assigned, and the Code and Regulation provisions assigned by the text and supplement (or as modified by the assignment), and for working through the problems assigned, prior to class. See below re: mandatory drafting assignments.
Attendance: Class attendance is required by the rules of the American Bar Association and by the law school; students are directed to familiarize themselves with Policy IV-F of the Law School Policy Manual on class attendance. The professor reserves the right to adjust final grades for the course downwards for class attendance as follows: The student's final grade may be lowered by one Increment for each class absence (excused or unexcused; includes absences due to illness or work) in excess of three (3). Increments are defined below.
Basis for and Computation of Grade: Grades will be based on the student's grade on the final examination. Except as provided below, no papers, quizzes, or midterm examinations will be given or required. However, grades may be lowered, as described above in Attendance and as described immediately below.
At least one mandatory drafting assignment will be made during the course of the semester. The professor also reserves the right to make one additional such assignment. These assignments are likely to require library research in addition to drafting, will be graded on a pass/fail basis, and are required. The student's grade will be lowered by one Increment for failure to receive a passing grade on each such assignment. The professor reserves the right to allow a student to rewrite the assignment and receive a passing grade, if a failing grade is initially received. "Increments" are defined as follows: for J.D. students -- A, A-, B+, B, B-, C+, C, C-, D, E and for graduate students -- A, A-, B+, B, B-, C+, C, E. Examples: For example, a student who receives an A- grade on the final exam, but failed to receive a passing grade on one mandatory drafting assignment (and either was not allowed to rewrite the assignment or failed to receive a passing grade on the rewrite), will receive a B+ grade in the course (lowered by one Increment). If that student also has four absences, the student may receive a B grade in the course (lowered by one additional Increment).
Tentative Office Hours: Until further notice, office hours will be Wednesdays and Thursdays from 10:00 to 11:30 a.m. and 1:30 to 2:30 p.m. (except for Wednesdays on which there are faculty meetings). I can be available at other times by appointment to accommodate evening students. Please utilize e-mail and voice mail to reach me, as well. You may e-mail specific questions and problems to me for my comments. a:\pshipsyl.99
Partnership Taxation
Professor Daicoff
Fall, 1999
Required Texts: Lind, Schwarz, Lathrope, & Rosenberg, Fundamentals of Partnership Taxation, 5th ed. (Foundation Press, 1998) (the "Text"), 1999 Supplement to the Text (when available in the bookstore), and Commerce Clearing House, Federal Income Tax Code and Regulations - Selected Sections, 1999-2000 edition ("Selected Sections") or one set of the full Code and Regulations.
Assignment for Week 1: Friday, August 27, 1999:
Read and be prepared to discuss pages 1-24 of the Text.
Read all Code and Regulations Sections assigned by the Text - except for Section 7704 . Do not read the entire Code Section as assigned on p. 15; instead, read only Section 7704(a) through (c)(2), (d)(1), and (f).
Do Problem 1(a)(f) only on page 14-15 (omit #2.) and be prepared to answer these questions in class.
Assignment for Week 2: Friday, September 3, 1999:
Chapter Two:
Read: Text pages 26-38 (we will likely not discuss past page 38, but you are welcome to read ahead to page 42 to reduce Week 3's reading) and Code and Regs §§ as assigned by the text.
Do: Problems on p. 28-29, try problem on p. 35-36, do problem on p. 38.
Partnership Taxation
Professor Daicoff
Fall, 1999
Required Texts: Lind, Schwarz, Lathrope, & Rosenberg, Fundamentals of Partnership Taxation, 5th ed. (Foundation Press, 1998) (the "Text"), 1999 Supplement to the Text (when available in the bookstore), and Commerce Clearing House, Federal Income Tax Code and Regulations - Selected Sections, 1999-2000 edition ("Selected Sections") or one set of the full Code and Regulations.
Assignment for Week 1: Friday, August 27, 1999: Chapter One
Read and be prepared to discuss pages 1-24 of the Text.
Read all Code and Regulations Sections assigned by the Text - except for Section 7704 . Do not read the entire Code Section as assigned on p. 15; instead, read only Section 7704(a) through (c)(2), (d)(1), and (f).
Do Problem 1(a)(f) only on page 14-15 (omit #2.) and be prepared to answer these questions in class.
Not assigned:
Optional: Cunningham and Cunningham treatise (paperback) pages 1-4, 8-9, and 31-42. This book is not required but is very highly recommended for this course.
Partnership Taxation
Professor Daicoff Fall, 1999
Assignment for Week 2 September 3, 1999
Chapter Two:
Read: Text pages 26-38 (we will likely not discuss past page 38, but you are welcome to read ahead to page 42 to reduce Week 3's reading) and Code and Regs §§ as assigned by the text.
Do: Problems on p. 28-29, try problem on p. 35-36, do problem on p. 38.
Partnership Taxation
Professor Daicoff Fall, 1999
Assignment for Week 3 September 10, 1999
CHAPTER TWO - CONT'D:
Read: Text pages 38-66 and Code and Regs §§ as assigned by the text.
Do: Problems on p. 42 (1 only; skip 2), p. 51 (skip (b)), and p. 64-65.
Partnership Taxation
Professor Daicoff
Assignment for Week 4 - February 3, 1998
CHAPTER THREE:
Read: Text pages 88-126.
Do: Problems on p. 113-14 (skip parts (e) and (f)); 116-17; and 118 (use the Regs.); 126-27 (do 1 and 2(a) only).
Optional: If you would like to reduce the reading for next week, read text pages 127-134; however, this is entirely optional.
Partnership Taxation
Professor Daicoff
Assignment for Week 5 September 24, 1999
CHAPTERS THREE & FOUR:
Finish: Assignment from Week 4.
Read: Text p. 103-146 (and of course, Code and Regs as assigned by the text).
Do: Problems p. 110 (skip 1.(c) & (f)-(h)) and Problems p. 145 (skip 1.(f)-(i), 2., & 3.).
Optional: Read Cunningham, Chapter 5.
Partnership Taxation
Professor Daicoff
Assignment for Week 6 October 1, 1999
CHAPTER FOUR - CONT'D.
Read: Text p. 146-178 and Code and Regs. Sections as assigned by the Text.
Do: Problems p. 156-7 (part (a) only) and p. 178 (parts 1(a) - (c) only).
Optional: Now is an excellent time to begin reading Cunningham, Chapters 5, 6, & 7. You may also look at McKee, Nelson & Whitmire §10.02; §10.04. While working through Chapter 4 of the Text, you should strongly consider consulting other sources for assistance.
Partnership Taxation
Professor Daicoff
Assignment for Week 7 October 8, 1999
CHAPTER FOUR - CONT'D. (Allocation of Partnership Liabilities)
Read: Finish assignment from Week 6, then read Text p. 179-208.
Do: Problems p. 196-197: 1(a)-(c) and 2(a) only.
Optional: Cunningham, Chapter 8.
Revised Office Hours: Wednesdays 10:30 11:30; Wednesdays and Thursdays 1:30 3:30; and Fridays 5:30 6:00 in Room 208.
Note: No class on November 6, 1999. Makeup class to be scheduled at later date.
First Mandatory Drafting/Writing/Research Assignment will be distributed around October 22 and
will be due around November 12.
Partnership Taxation
Professor Daicoff
Assignment for Week 8 October 15, 1999
Finish anything left over from CHAPTER 4.
Begin the following assignment:
CHAPTER 5: TRANSACTIONS BETWEEN PARTNERS AND PARTNERSHIPS
Read: Text p. 209-235.
Do: Problem p. 221: 1 only.
Problem p. 229: 1(a)-(c) and 4(a)-(d) only.
Problem p. 235: 1(a)-(e) and 3(a)-(f) only.
Note: No class on November 6, 1999. Makeup class to be scheduled at later date.
First Mandatory Drafting/Writing/Research Assignment will be distributed around October 22 and will be due around November 12.
Partnership Taxation
Professor Daicoff
Assignment for Week 9 October 22, 1999
Finish Chapter 5 and begin the following assignment:
CHAPTER 6: S/E OF PSHIP INTERESTS
Read: Text p. 238-264.
Do: Problems p. 258 (do 1 only; skip 2 & 3) and p. 264 (do 1 only; skip 2 & 3).
Partnership Taxation
Professor Daicoff
Assignment for Week 10 October 29, 1999
CHAPTER 7 - OPERATING DISTRIBUTIONS BY THE PSHIP:
Read: Text p. 266-298.
Do: Problem 1 on p. 277; Problem 1 on p. 280; Problem (a) on p. 285; and Problem 1 on p. 299.
M.T. answers to drafting exercise due to J.D./LL.M. students on October 29, 1999 (need not be in "final" form; not to be handed in to me).
Tentative Plan for Rest of Semester (a.k.a. "the light at the end of the tunnel"):
Week 11: Nov. 5 - No Class J.D. memos and pship provisions due to M.T. students.
Week 12: Nov. 12 - Chapter 8 - Liquidation of a Partnership Interest and Memos Due.
Week 13: Nov. 19 - Chapter 9 - Death of a Partner
(Review Questions will be handed out).
Makeup Class: Nov. 13 or 20 - Chapter 9A - The Anti-Abuse Regulations &
Chapter 10 - S Corporations.
Week 14: Tuesday, Nov. 30 - Review Questions.
Optional Review Session for Exam: Thursday evening, Dec. 2.
Exam: Saturday, Dec. 4
Answer to Problems p. 238-239, 1.(b):
1. AB equal pship is in a highly speculative business whose profits fluctuate widely. This year it has profits of 20K, 12K OI and 8K LTCG. A and B share profits and losses equally. A renders services to the pship which are continuous, related to the function of the pship and not in the nature of a capital expenditure.
(b) what if A renders the services under an agreement that he will receive 15K or 50% of the profits before taking into account any guaranteed payments, whichever is greater, and the profits are 20K (consisting of 12K OI and 8K LTCG)?
Then, this is like RR 69-180 (also see Regs. §1.707-1(c) Ex (2)). A's share of profits = 10K, so there is a guaranteed payment of 5K (15K "floor" minus 10K profit share). This guaranteed payment results in 5K of OI to A and is deductible by the pship since paid for services so that pship income drops to 15K, of which there is 7K OI and 8K LTCG. A's distributive share (DS) is 10K (15 - 5 guaranteed payment), so that the rest, or 5K, is B's DS. Therefore, their sharing ratio is 2/3:1/3 (based on 10:5). Thus, A gets 2/3 the 7K OI and 2/3 the 8K LTCG; B gets 1/3 the 7K OI and 1/3 the 8K LTCG. This is all calculated under the authority of RR 69-180.
A B
§707(c) OI 5K -0-
OI pship profits 4,667 2,333
LTCG profits 5,333 2.667
Totals 15K 5K
Partnership Taxation
Professor Daicoff
Assignment for Weeks 11 & 12 November 12 & 13, 1999
For Week 11: (Nov. 12):
CHAPTER 8 - LIQUIDATION OF A PARTNERSHIP INTEREST:
Read: Text pp. 301-330.
Do: Problem p. 307: 1 (all subparts);
Problem p. 320: 1 (a) and (b) only; and
Problem p. 330: (a) only.
For Saturday, November 13, 1999 (the makeup session): Read pages 364-371 & 374-390, note on 396-7, 398-400, 402-407, 409-414 (do no problems for this class session).
NOTE: For the mandatory drafting/research assignment, you may assume that the partnerships income equals its expenses exclusive of depreciation (i.e., taxable income is zero except for depreciation deductions) except in year 1 when there are $10K of operating expenses. You may also assume that only interest payments are payable on the loan for the first few (e.g., five) years and that no payments of principal will be made for the first five years. You may omit calculations characterizing the debt as recourse or nonrecourse and assume it to be nonrecourse.
Partnership Taxation
Professor Daicoff
Assignment for Weeks 13 & 14 November 19 & 30, 1999
Read Text pages 330-362 and do problems on pages 346 (1 only) and 361. Optional = Problem p. 362, 1(c) and 2(d) and (e) only.
Answer all Review Questions (long and short) handed out in class on Nov. 19, for Nov. 30.