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Pages:
8 pages/≈2200 words
Sources:
6 Sources
Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
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MS Word
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Total cost:
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Topic:

ACCOUNTING (Research Paper Sample)

Instructions:
1 break up pages into different sections and give at least 6 original examples to make your point, use letters as names in your examples and place these examples at discussion points 2 when a rule or point of law is stated, state our authority, eg: code section, regulation, court case, etc 3 dont type out code sections, regulations or portions of case law decision or professional reports/articles verbatim-paraphrase and use your own word. 4 cases are not always decided correctly, states if you agree or disagree with court's decision whenever possible. 5 number all pages 6 use footnotes, not endnotes 7 make sure you include a complete and accurate bibliography. try going to the regulations or professional articles covering the topic. "optional adjustments to basis are also available to the partnership when property is distributed to a partner. if a section 754 optional adjustment-to-basis election is in effect, the basis of partnership property is increased by the following: 1 Any gain recognized by a distributee partner. 2 the excess of the partnership's adjusted basis for any distributed property over the adjusted basis of that property in the hands of the distributee partner. conversely, the basis of partnership property is decreased by the following: 1 any loss recognized by a distributee partner. 2 in the case of a liquidating distribution, the excess of the distributee partner's adjusted basis of any distributed property over the basis of that property to the partnership. section 734 (b) assumes that the inside basis for all partnership assets equals the outside basis for all of the partners' interests immediately before the distribution. when this equality exists both before and after the distribution, no adjustment to the basis of partnership property is necessary. however, when the equality does not exist after the distribution, an adjustment can bring the inside and outside bases back into equality," source..
Content:
Running head: ACCOUNTING
Basis adjustment under section 734(b)
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Basis adjustment under section 734(b)
Introduction
A policy of maximum recognition is pursued by the partnership tax contribution and distribution rules. When people enter into a partnership, there is very little tax disincentive involved when property is moved in and out of the partnership by the partners. The importance of this policy is that it ensures efficient formation of the partnership as well as making operation decisions. However, Osofsky (2006) says that partners are allowed by the nonrecognition of rules to shift and defer gains. Therefore, tax revenues are threatened and businesses can take advantage of inefficient transactions can be encouraged.
There are some contribution and distribution rules provided under Subchapter K which curb shifting and deferral of gains and act as a backstop to the nonrecognition regime. Section 734(b) is an example of such a rule. The aim of section 734(b) is to preserve the correct amount of income after distribution (Osofsky, 2006). To be more specific, this section requires that when loss or gain is recognized by the distributee partner, there has to be basis adjustment inside the partnership. Second, the same will apply after the distributee partner changes the basis of assets in his or her hands upon distribution.
Potential challenges
Subchapter K of the Internal Revenue Code provides some efficient partnership tax provisions. The provisions may face some challenging tasks since they have to establish a sensible mechanism for tax arrangements between partners which can at times be difficult to calculate. According to Abrams (n.d), when two partners contribute equally to start a business where revenues from the investment will be shared equally, it should not be challenging when it comes to taxing the individuals.
However, problems will arise during taxation when one of the partners requests for a bigger share of initial receipts and lower share of back-end receipts. When the amount they have contributed to start the partnership are unequal, a mechanism will be establish to account for the difference and that structure will be used during taxation (Cartono, 2008). Scholars believe that a partnership is a very flexible type of business and this flexibility is captured well by the rules of Subchapter K.
Tax transparency is the core paradigm which best describes Subchapter K. This implies that a partnership is supposed to be all but invisible when it comes to the taxing system. Specifically, transactions carried out between a partner of the partnership should as mush as possible be free from taxation (Abrams, n.d). However, when partners of the partnership enter into deals with third-parties, the activities they engage in are taxable. Therefore, many contributions and distributions are not taxed but when interests and partnership assets are transferred to non-partners, the activities will be liable to taxation. There are some simple examples which are helpful in elucidating the role of section 734(b).
Adjusting an asset’s basis upon distribution
To start with, the right amount of partnership income is preserved by section 734(b) if the partner wants to adjust an asset basis in his or her hands upon distribution. Take example of a partner A who gains a liquidating distribution of Greenacre with an inside basis $100 (Osofsky, 2006). In Greenacre, A will have to take a basis of $300 if A has an outside basis of $300. This implies that in A’s hands, Greenacre’s basis will increase by $200. A $200 of gain has been evaded by the partnership and the amount could be deferred until the liquidation of the partnership.
Section 734(b) requires $200 basis points to be adjusted downwards to a fitting asset in the business so that the partn...
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