Partnership Matters

May 3, 2012

Contributions of Property with BIG or BIL; Reverse § 704(c) Allocations:

See the IRS Audit Technique Guide for a good overview of contribution matters relating to property with BIG or BIL.


Orrisch v. Commissioner, 55 T.C. 395 (Dec. 2, 1970) (Download): Whether an amendment to a partnership agreement allocating to petitioners the entire amount of the depreciation deduction allowable on two buildings owned by the partnership was made for the principal purpose of avoidance of tax within the meaning of section 704(b).  The court holds that avoidance of tax was the principal purpose and that the amounts of each of the partners’ deductions for the depreciation of partnership property must be determined in accordance with the ratio used generally in computing their distributive shares of the partnership’s profits and losses.  See also section 704(a) and (b).