Closing Tax Loopholes: New Rules for Partnership Basis Shifting.
This bill closes specific tax loopholes that allowed related parties operating through partnerships to avoid taxes by manipulating the tax basis of assets. It mandates recognition of gain when property distributions result in a basis increase of other partnership assets. For the public, this means tax strategies involving related parties will be curtailed, and penalties for understatements related to these transactions will be doubled.
Key points
Requires recognition of gain on property distributions between related partners if the transaction results in a basis increase of other partnership assets.
Increases the penalty for tax understatements related to these transactions from 20% to 40%.
The new rules apply to partnerships where partners are related; small businesses meeting specific gross receipts tests are exempt.
Status:
Introduced
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