Treasury Issues New Regulations on Allocation of Partnership Liabilities
On Dec. 2, 2024, the Treasury Department issued final regulations providing more detail on how a partnership’s recourse liabilities must be allocated and in some cases changing the result under existing regulations.The new regulations provide more clarity in situations regarding partnership recourse liabilities than prior law.
December 17, 2024 at 10:00 AM
6 minute read
The allocation of a partnership’s liabilities can have important tax consequences. A partner’s tax basis in his partnership interest includes his share of the partnership’s liabilities. A partner’s tax basis in his partnership interest is significant because any losses the partner is allocated from the partnership in excess of his basis are suspended, and cash distributions the partner receives from the partnership are generally taxable only to the extent they exceed his basis.
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