This book attempts the simplest possible introduction to an intricate body of law. Any “simplified” description of the rules of partnership taxation would be so misleading as to be useless. We have therefore tried to make the subject accessible not by paraphrasing the rules, but by including numerous illustrations that are as straightforward as possible. The text focuses on simple partnerships holding few assets and engaging in routine transactions. It places the rules in context by pointing out the purposes of the statute and regulations and presenting background information about practical matters such as how partnerships maintain capital accounts and how nonrecourse financing works. Using many examples, it then shows the operation of the rules in everyday cases encountered by practitioners.

This is not a reference book: many interesting and difficult issues have been ignored. Some matters, such as the application of § 736 to noncash distributions and the taxation of tiered partnerships, are not discussed at all. Most of the points that are addressed, however, are discussed at considerable length. Changes may be on the horizon; as this edition is going to press, tax professionals are grappling with understanding and implementing 2017 tax legislation, which included a reduction to the tax rate for some types of pass-through income. Numerous proposed regulations have been issued in recent years, and new regulatory projects interpreting the recent legislation are likely. Our goal has been to give students background material and illustrations so that they can begin to understand and work with a statute that was drafted for (and by) experienced practitioners and so that they can be prepared to make sense of any future changes.

Most chapters end with a section comparing the tax treatment of partners with that of the shareholders of S corporations. Many students encountering partnership taxation for the first time have already studied subchapter S. We expect that an examination of some of the basic differences between subchapters S and K should help those students understand both subjects.


Imprint: Foundation Press
Series: Concepts and Insights
Publication Date: 09/13/2018

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  • Explains how the 2017 Act significantly changes analysis of entity choice.
  • Explores the interaction of new I.R.C. section 199A with the various types of payments and allocations that partnerships may make to partners.
  • Adds numerous new examples throughout the book and updates many others. The book contains over 145 examples that illustrate key principles.
  • Expands the “Comparison with Subchapter S” discussions at the end of several Chapters.
  • Expands across multiple chapters the discussion of partner capital accounts and partnership asset book values.
  • Adds additional discussion of the assignment of income doctrine in Chapter 6.
  • Expands the discussion of § 704(c) in Chapter 7, including adding an in-depth description of new proposed regulations that address the contribution of assets with built-in losses and adding a new discussion of reverse § 704(c) allocations.
  • Adds discussion of proposed regulations under § 751 in Chapter 12.
  • Expands the discussion of § 736 in Chapter 13.

Learn more about this series.