Maintaining Partner Capital Account Balances: Preparing Workpapers, Documenting Allocations and Corrections

Webinar: ID# 1026352
Recorded CD or On-Demand
About This Course:
This webinar will provide tax preparers and compliance professionals serving partnerships and LLCs with a solid and practical foundation to maintaining partners’ capital account balances, including account setup and workpaper preparation. The panel will offer a practical discussion of tax allocation rules and illustrate the application of the rules with mathematical examples, explanations of operating agreement terms, and approaches to compliance.

Maintenance of capital accounts is one of the more challenging elements of partnership tax compliance. Even experienced professionals sometimes struggle with unclear terms in partnership agreements, applying targeted allocations, and ensuring that allocations and corrections are carried forward in documenting the partners’ capital accounts.

Quite often, the capital accounts are not set up correctly, or at all, at the inception of the partnership. Making sure that allocations are properly documented and carried forward, correcting misallocations from prior years, and dealing with complex issues such as non-recourse liabilities and minimum gain chargebacks can present additional difficulties in maintaining accurate capital accounts.

A critical step in capital account balance maintenance is documenting an adviser’s interpretation of the partnership agreement’s allocation provisions. The partnership workpapers should clearly detail any gray areas where the adviser had to apply independent judgment in making a current year allocation, or in adjusting an allocation from prior years. Partnership accounting is by its very nature complicated, and there are a number of transactions and events that often cause difficulties in maintaining capital accounts.

Listen as our experienced panel provides a practical guide to creating and maintaining capital account balances, including tips and tools for creating clear and defensible workpapers to document partnership allocations and corrections.

  • Setting up capital accounts at the beginning of operations
  • Book/tax differences
  • Handling adjustments required by Section 754 elections
  • Identifying errors in prior year account calculations
  • Maintaining workpapers and capital account schedules
    The panel will review these and other key issues:
  • Key tax allocation principles for capital accounts
  • Impact of “substantial economic effect” requirements in making capital account allocations
  • Documentation that advisers should include with capital account work papers
  • Identifying errors, miscalculations or misstatements in capital accounts
  • Documenting prior year adjustments
Learning Objectives

Upon completing this webinar, you will be able to:
  • Distinguish different methods for maintaining capital accounts
  • Recognize whether the safe harbor provisions provide protection for targeted allocations
  • Determine how a partner’s distributive share is determined under IRC 704(B)
  • Verify that allocations have substantial economic effect
  • Discern needed backup documentation to accurately calculate and carry-over partners’ capital accounts
How To Access Course And Materials

Handout materials and the phone number for live presentations are made available to you one day prior to the event via email from the presenter. Copies of the presentations are included with recorded versions.
If you order a recorded version of the webinar, CDs will be mailed out approximately 10 days after the live event. Shipping is included in the price of recorded versions.

Continuing Education Credits Available

This program has been approved for 2.0 CPE hours through Strafford Publications. To obtain CPE credit, attendees must participate in the live event (recorded versions do not qualify for credit), return an Official Record of Attendance to Strafford affirming their participation (including the CPE code announced during the program), and pay a processing fee of $35 per person.

Strafford will mail a certificate of credit within approximately two weeks of receiving your completed Official Record of Attendance, provided all required conditions have been satisfied.

Strafford is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit.
Maintaining Partner Capital Account Balances: Preparing Workpapers, Documenting Allocations and Corrections
Available on CD or On-Demand formats
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