Real Estate & Passthrough Finance Techniques Corner

On Oct 5, 2016, Treasury published temporary and proposed regulations under Code Sec. 752 (the "Temporary Regulations" and "Proposed Regulations," respectively). For over two decades, taxpayers have relied on a set of rules governing the allocation of partnership liabilities among partners that provided clarity and were both administrable and flexible in the allocation of partnership liabilities. These newly issued regulations would, in many cases, make it impossible for taxpayers to allocate liabilities with any degree of certainty. In addition, particularly if the Proposed Regulations are finalized, they will make it extremely difficult, if not impossible, for taxpayers to transfer property subject to debt in excess of basis to a partnership without triggering gain at the time of the transfer or subsequently. The Code Sec. 752 regulations that were issued in the 1990s (the "Existing Regulations") embraced the view expressed by the American Law Institute in its landmark, two-volume 1984 study of subchapter K issues and proposals.