Treatment of accrued partnership property tax liabilities for basis under Sec. 752.
In some jurisdictions, the local taxing authorities may have a direct claim against the property as well as a partner's personal assets for any unpaid taxes. This type of accrued liability is considered to be recourse. Partners subject to such direct claims bear the economic risk of loss for the accrued taxes and, therefore, may be required to contribute money to the partnership or make a direct payment to satisfy the tax obligation. These recourse liabilities should be allocated to those partners who bear the economic risk of loss (Regs. Sec. 1.752-2(a)).
In other jurisdictions, the local taxing authorities may satisfy their claim solely from the property. In this case, the accrued liability is deemed to be nonrecourse. The partners bear no potential economic risk of loss for the accrued taxes, as they will not be required to make any contributions to the partnership or additional payments to satisfy the tax obligation. All partners should be allocated a portion of these accrued taxes according to their sharing ratios under the three-tier system applicable to nonrecourse liabilities established in Regs. Sec. 1.752-3. Additionally, accrued property taxes that fall in this category increase the minimum gain attributable to the collateralizing property.
From William T. Carman, CPA, Denver, Colo., and Jordan S. Zoot, CPA, New York, N.Y.
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|Author:||Zoot, Jordan S.|
|Publication:||The Tax Adviser|
|Article Type:||Brief Article|
|Date:||Nov 1, 1992|
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