Overview
CCH’s Standard Federal Tax Reports quoted Aaron Nocjar in an October 13 article titled “IRS Clarifies Recourse Partnership Liability Rules; Takes Aim at Leveraged Partnership and More.” The article discusses the IRS’s release of final, temporary and proposed regulations to clarify the recourse partnership liability rules. The IRS reiterated that “bottom-dollar guarantees” generally should not be recognized as payment obligations under Regulation §1.752-2(b)(3) because they lack a significant non-tax commercial business purpose.
Mr. Nocjar says: “The regulatory package limits the use of so-called bottom-dollar guarantees, indemnities, and similar arrangements (including capital contribution obligations, tranched debt, and deficit restoration obligations) to characterize a partnership liability as a recourse liability allocable to any particular partner. Such rules, however, permit certain de minimis exceptions and analogous arrangements regarding ‘vertical slices’ of partnership liabilities to be recognized for recourse liability purposes, which are welcomed developments.”
The full article can be read at CCH Group (subscription required).
