CAPITAL ACCOUNTS704(b) &MINIMUM GAINPresented byBrad Elphick, CPA, Novogradac & Company LLP
Increases to partner’s capital accounts Cash contributed Fair market value of property contributed Net of liabilities assumed by partnership Allocations of income or gain Decreases to partner’s capital accounts Cash distributed Fair market value of property distributed Net of liabilities assumed by partnership Allocations of loss or deduction, most credits CAPITAL ACCOUNTS
Partnership Agreement TAX CREDITS $ $ $ Developer Investor Limited Partnership Capital Account CREDITS LOSSES
Developer Investor Limited Partnership Capital Account CREDITS LOSSES
704(b) Issues $ Developer Investor Limited Partnership Does not receive credits or losses Cannot use credits or losses Must pay an adjuster to the Investor Capital Account CREDITS LOSSES 704(b)!!!
What is it? Assumed sale of asset at year end Assumed sale price of non-recourse debt plus $1 Gain is calculated Assumed Sale price less Net Book Value How does it help a 704(b) problem? Assumed Minimum Gain is allocated to partners Losses can continue to flow to partners with negative capital accounts Credits flow to the investor partner Minimum Gain
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