IRS Floats New Regulations On Disguised Sales

Law360, New York (January 29, 2014, 3:23 PM EST) -- The Internal Revenue Service released proposed regulations Wednesday clarifying ambiguities in its treatment of disguised property sales between individuals in partnerships.

Specifically, the proposed regulations address how reimbursements for preformation capital expenditures should be treated and how distributions that reimburse partners for the partnership's borrowing should be handled, among other issues.

A partner's property contributions to a partnership are generally tax-free, and a partnership's property contributions to a partner are generally tax-free as well. But if a transfer like this can be characterized as a sale or exchange of property, it is considered to be a disguised sale of property and...

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