Allocation of Profits and Losses to Partners
In this audio snippet, you'll hear about:
- Very complex section of the tax code
- Attorneys that specialize in partnership law have spent years honing their craft
Audio Transcript
Yosef:
In the Internal Revenue Code of the Treasury Regulations, one of the
most complicated areas in taxation is the allocation of profits and
losses to partners. And I mean, if somebody is really, really, really
bored they could read stems of pages on Treasury Regs about it defining
what allocations are acceptable to the IRS, which ones are not. They
have to follow something called, "substandard economic effect," that's
Section 721.
Travis:
[laughs]
Yosef:
I could be wrong, but it's definitely in there, in the 700's of the
Internal Revenue Code. It explains what's acceptable, what's not.
Actually, it's not in the Internal Revenue Code, it's in the
Regulations that explain the Code.
Travis:
[laughs] Well, I'm glad you got all this stuff memorized, because I
just have no desire to know that stuff. I guess that's why I pay you,
huh?
Yosef:
That's why you should pay somebody to do these things, because again
this is a very specialized area of knowledge. And I can tell you that
practitioners who understand the area of Partnership Law, they have
spent years working and developing it. I know this is going to sound a
little weird, but attorneys who especially practice in Partnership Law
will tell you it's part of the sexiest area of tax law.
Travis:
Oh, yeah. [laughs]
Yosef:
Mainly because there's so many creative things that can be done and
could be done to a taxpayer's advantage. But again you have to follow
the very, very complex guidelines designed by the IRS.
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