704 b book adjustment

A partners capital account reflects the partners share of the book value of the partnership and so is a better measure than outside basis of each partners interest in the venture. Section 704 cintroduction if basis of contributed property differs from its section 704 b ii book value, section 704 cla requires income, gain loss, and deduction with respect to such property to be allocated among the partners 11 so as to take account of the variation between the basis of the property to the partnership and its fmv at. Adding to the list of partnership revaluation events. Rather, they create book income or loss for the purposes of adjusting the. Reconciling gaap basis and tax basis in partnership income tax returns and k1 schedules 704b bookups, potential impact of irs centralized. What the provision does is determine the difference between the book. Liquidating distributions can be made in accordance with the partners respective interests in the partnership. Section 704 b books are required to be maintained, because it is generally required by the tax law, but you are not required to show these books on the partnerships tax return balance. Irs adds requirement for tax basis partner capital information. Reconciling gaap and tax basis in partnership k1s cpe. Section 704b and capital account revaluations federal register. The requirements of the safe harbor are that the partnership must maintain the partners capital accounts in accordance with the sec. Even though a and b are 5050 partners, section 704c principles. For example, capital accounts are adjusted to reflect the fair market.

Section 704b of the internal revenue code provides that a. The sole purpose of section 704 c is to prevent screwing b over in this manner. Difference between gaap and 704 b a knowledge archive. Continuation of partnership allocations and special rules for allocations related to booktax disparities. K1 in item l that is, gaap, 704b book, or other, and tax basis capital. If section 704 c didnt exist, a and b would split both the tax. Unlike 704 b, under the gaap accounting methods, fair market value of an asset is only adjusted on certain events that are known as book. Difference between gaap and 704 b november 15, 2015, ann r, leave a comment. Whether it is an entrepreneurship, corporation or partnership, it is important for businesses to understand the basics of accounting for their transactions in order to run smoothly. Difference between gaap and 704 b difference between.