Section 2: 30–40%T7
Partnership Compliance and Basis
Exam Insight
Partnerships pass through income on Schedule K-1 and uniquely include partners' shares of liabilities in outside basis, which the TCP exam tests through basis rollforwards and distribution analysis. Guaranteed payments, Section 704(b) allocations, and Section 751 hot assets are recurring high-value topics.
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What AICPA Wants You to Know
- 1Identify separately and non-separately stated items reported on Form 1065 and Schedule K-1.
- 2Compute a partner's outside basis including the share of partnership liabilities.
- 3Apply the treatment of guaranteed payments to the partner and the partnership.
- 4Apply Section 704(b) allocations and the substantial economic effect requirement.
- 5Distinguish nonliquidating from liquidating distributions and compute the resulting gain, loss, and basis.
- 6Recharacterize gain on the sale of a partnership interest using Section 751 hot assets.