Sale or Exchange of a Partnership Interest

Transcription

1 5 Sale or Exchange of a Partnership Interest 1 General rule: a sale by a partner generates capital gain or loss. Exception for seller s share of partnership hot asset gains or losses (sec. 751(a)) 2

2 Amount realized includes net debt relief: For example: $750 Cash from Buyer $250 Seller share of PSP debt the seller realizes $1,000 on the transaction. Reg (h) 3 Alternate rule for O.B. in reg (b): Tax Basis Capital Plus Debt Share Plus or minus adjustment = O.B.

3 Hot assets: Unrealized receivables & Inventory Items 5 Unrealized Receivables Right to payment for Goods delivered or to be delivered. Services rendered or to be rendered. Recapture items 6 6

4 In Hale v. Comm r, T.C. Memo , one of the partnership s assets was a profits only interest for services conditioned on the partnership s performance of the services. 7 It is reasonably clear from the discussion of section 751 in both the Senate and House Reports that Congress meant to exclude from capital gains treatment any receipts which would have been treated as ordinary income to the partner if no transfer of the partnership interest had occurred. Roth v. Commissioner, supra. The receipts in question herein were precisely of this character. 8

5 Inventory Items 7 1) Stock in trade or inventory 2) Property other than: Capital assets IRC sec Assets 3) Property which would, if held by the selling partner, be an inventory item. Need not be substantially appreciated 9 Selling Partner s Ordinary Income or Loss Fictional sale of all partnership hot assets for FMV at the partnership level allocated to the seller 10

6 Calculation of Capital Gain or Loss with Hot Assets 8 Realized gain or loss without sec. 751 (at partner level). - Ordinary income or loss on fictional hot asset sale for FMV at PSP level. = Recognized capital gain or loss (at partner level) Example 12

7 A and B are equal partners in personal service partnership PRS. B sells to T for an amount realized of $16K ($15 cash + $1k debt shift to T) 13 Pre-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 9,000 15,000 10,000 B 9,000 15,000 10,000 Debt + Equity 20,000 32,000

8 Pre-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: Seller B s 50% share of A ordinary income 9,000 15,000 = $7,000 10,000 B 9,000 15,000 10,000 Debt + Equity 20,000 32, Cap. Gain W/O 751 Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 16

9 Cap. Gain W/O 751 Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -10,000 = Cap Gain 6, Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -10,000 = Cap Gain w/o 751 6,000 - Ordinary Income -7,000 18

10 Cap. Loss of <$1,000> Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -10,000 = Cap Gain w/o 751 6,000 - Ordinary Income -7,000 = Capital Loss <1,000> 19 Summary of B s Tax Consequences: Ordinary Income = $7,000 Capital Loss = <$1,000> 20

11 Prop. Reg (a)(2) Nov. 17, 2014 clarifies treatment of sales of partnership interests. Link to regs. on Page 66 The income or loss realized by a partner upon the sale or exchange of its interest in section 751 property is the amount of income or loss from section 751 property (taking into account allocations of tax items applying the principles of section 704(c), including any remedial allocations under (d), and any section 743 basis adjustment pursuant to (j)(3)) that would have been

12 allocated to the partner (to the extent attributable to the partnership interest sold or exchanged) if the partnership had sold all of its property in a fully taxable transaction for cash in an amount equal to the fair market value of such property (taking into account section 7701(g)) immediately prior to the partner s transfer of the interest in the partnership. (Prop Reg (a)(2)) Any gain or loss recognized that is attributable to section 751 property will be ordinary gain or loss. The difference between the amount of capital gain or loss that the partner would realize in the absence of section 751 and the amount of ordinary income or loss determined under this paragraph (a)(2) is the transferor s capital gain or loss on the sale of its partnership interest. (Prop Reg (a)(2))

13 The rules contained in (a)(2) would apply to transfers of partnership interests that occur on or after November 3, (Preamble to Prop. Regs.) Impact of Sec. 704(c) 26

14 Example (Not in text) A and B form the AB equal partnership. B contributes a zero basis section 1231 asset worth $14K and $1K cash. All of the built-in gain is section 1245 recapture 27 A contributes a note receivable worth $10K (basis 10K) and a capital asset worth $5K (basis $7K). 28

15 Post-Formation Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 17,000 15,000 18,000 B 1,000 15,000 2,000 Debt + Equity 20,000 32,000 B sells to T for an amount realized of $16K. ($15 cash + $1k debt shift to T) 30

16 Pre-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 17,000 15,000 18,000 B 1,000 15,000 2,000 Debt + Equity 20,000 32,000 B s share of the gain on the U/R (section 1245 recapture), per 704(c), is the entire $14,000. Sec. 751 O.I. = $14,000 32

17 Amount Realized Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16, Cap. Gain W/O 751 Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -2,000 = Cap Gain 14,000 34

18 Cap. Gain Zero Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -2,000 = Cap Gain w/o ,000 - Ordinary Income -14,000 = Capital Gain 0 35 Impact of Sec. 754 Election 36

19 Example (Not in text) Same facts as prior example, but B recently inherited the PSP interest from D. B s O.B. was stepped up to 16K per sec ($15K FMV + $1K debt share $0 IRD ) No section 754 election 37 Pre-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 17,000 15,000 18,000 B 1,000 15,000 16,000 Debt + Equity 20,000 32,000

20 B sells to T for an amount realized of $16K. ($15 cash + $1k debt shift to T) 39 B s share of the gain on the U/R is 100% not 50%: Sec. 751 O.I. = $14,000 40

21 Amount Realized Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16, Cap. Gain W/O 751 Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -16,000 = Cap Gain w/o

22 B: O.I. $14K; Cap. Loss <$14K> Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -16,000 = Cap Gain w/o Ordinary Income -14,000 = Capital Loss <14,000> B is, in effect, punished due to the lack of a PSP section 754 election 43 Summary of B s Tax Consequences: Ordinary Income = $14,000 Capital Loss =<$14,000> 44

23 Post-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 17,000 15,000 18,000 T 1,000 15,000 16,000 Debt + Equity 20,000 32,000 If the section 1231 asset is sold for $14,000 T recognizes $14,000 of ordinary income and T s O.B. is adjusted upward by $14,000. T is also punished by the absence of a 754 election 46

24 Same Facts but with Sec. 754 Election when B inherited the PSP Interest 47 As a result of the section 754 election, beneficiary B had a section 743 upward adjustment of $14,000 relating to the unrealized receivable (which was worth $14K on the date of death) 48

25 Pre-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 17,000 15,000 18,000 B 1,000 15,000 16,000 Debt + Equity 20,000 32,000 B sells to T for an amount realized of $16K. ($15 cash + $1k debt shift to T) 50

26 B s share of the gain on the U/R: Sec. 751 O.I.: Share of U/R gain $14,000 Unused 743(b) Adj. -14,000 Sec. 751(a) O.I. = $0 51 Amount Realized Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 52

27 Cap. Gain W/O 751 Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -16,000 = Cap Gain w/o Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -16,000 = Cap Gain w/o (14K 14K 743(b) Adj.) -0 = Cap. Gain or Loss 0 54

28 As a result of the section 754 election, T as a section 743 upward adjustment of $14,000 relating to the unrealized receivable (which was worth $14K on the date of purchase) 55 Post-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 17,000 15,000 18,000 T 1,000 15,000 16,000 Debt + Equity 20,000 32,000

29 If the section 1231 asset is sold for $14K T recognizes $0 (14K K ordinary income minus $14 K sec. 743(b) adjustment). 57 Impact of a Discount (not in text) Old Partnership 58

30 A and B are equal partners in personal service partnership PRS. B sells to T for an amount realized of $10K ($9 cash + $1k debt shift to T) which reflects a discount below the net asset value of the 50% partnership interest. 59 Pre-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 9,000 15,000 10,000 B 9,000 15,000 10,000 Debt + Equity 20,000 32,000 60

31 A Partnership Level Test Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5,000 Unrealized Rec. 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: Seller B s 50% share of PSP level A ordinary 9,000 income 15,000 = $7,000 10,000 B 9,000 15,000 10,000 Debt + Equity 20,000 32, Cap. Gain or Loss Cash from T 9,000 Debt Shift To Buyer 1,000 Amount Realized 10,000 62

32 Cap. Gain or Loss Cash from T 9,000 Debt Shift To Buyer 1,000 Amount Realized 10,000 - Outside Basis -10,000 = Cap Gain w/o Cap. Loss of <$7,000> Cash from T 9,000 Debt Shift To Buyer 1,000 Amount Realized 10,000 - Outside Basis -10,000 = Cap Gain w/o Ordinary Income -7,000 64

33 Cap. Loss of <$7,000> Cash from T 9,000 Debt Shift To Buyer 1,000 Amount Realized 10,000 - Outside Basis -10,000 = Cap Gain w/o Ordinary Income -7,000 = Capital Loss <7,000> 65 Summary of B s Tax Consequences: Ordinary Income = $7,000 Capital Loss = <$7,000> 66

34 Tiered Partnerships The upper-tiered partnership is treated as owning its proportionate share of the hot assets of any other lower-tiered partnership in which it is a partner Collectibles (28% max. rate) and Section 1250 Capital Gain (25% max. rate) (Section 1(h) and Reg. 1.1(h)-1) 68

35 These Are Not Hot Assets (Sec. 751(a) is inapplicable) 69 Gain Attributable to: Appreciated Collectibles (28% rate) Section 1250 Capital Gain (25% rate) are subject to look-thru rules similar to section 751(a). (Section 1(h) and Reg. 1.1(h)-1) 70

36 Also applies to the sale of S corporation stock 71 Residual long-term capital gain or loss: Long-term capital gain or loss that the selling partner would recognize under section 741 (partner level after 751) minus Section 1250 capital gain if property sold for FMV at partnership level. (Reg. 1.1(h)-1(b)(3)(ii) and (c)) 72

37 Example (not in text) 73 A and B are equal partners in personal service partnership PRS. B sells to T for an amount realized of $16K ($15 cash + $1k debt shift to T) 74

38 Pre-Sale Balance Sheet Assets Tax Basis FMV O.B. Cash 3,000 3,000 Loan Rec. 10,000 10,000 Capital. Assets 7,000 5, Cap. Gain 0 14,000 Total Assets 20,000 32,000 Liabilities: 2,000 2,000 Capital: A 9,000 15,000 10,000 B 9,000 15,000 10,000 Debt + Equity 20,000 32, Cap. Gain Sec. 741 (after 751) Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -10,000 = Cap Gain 741 6,000 76

39 Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -10,000 = Cap Gain 741 6, Cap. Gain -7, Residual Cap. Loss Cash from T 15,000 Debt Shift To Buyer 1,000 Amount Realized 16,000 - Outside Basis -10,000 = Cap Gain w/o 751 6, Cap. Gain -7,000 = Residual LTCL <1,000> 78

40 Summary of B s Tax Consequences: 1250 Cap. Gain = $7,000 Res. Capital Loss= <$1,000> 79 Sales Not Redemptions The look-through treatment for Sec capital gain and collectibles does not apply to redemptions of partnership interests (per sec. 1.1(h)-1 regs). 80

41 Partner and Partnership Reporting of Sale Gain 81 Selling Partner s IRS Reporting Obligation Pursuant to Reg (a)(3), a partner selling or exchanging any part of an interest in a partnership that has any section 751 property at the time of sale or exchange must submit with its income tax return the following information The date of the sale ; The amount of any gain or loss attributable to the section 751 property; and The amount of capital gain or loss. 82

42 Partnership Reporting Obligation IRS Form Partnership Reporting Obligation IRS Form 8308 Attach to Form 1065 and send a copy to the transferor and transferee 84

43 8308 Instructions A partnership must file Form 8308 once the partnership has notice of the section 751(a) exchange Instructions A partnership may rely on a written statement from the transferor that the transfer was not a section 751(a) exchange unless the partnership has knowledge to the contrary. If a partnership is in doubt whether partnership property constitutes unrealized receivables or inventory items or whether a transfer constitutes a section 751(a) exchange, the partnership may file Form 8308 to avoid the risk of incurring a penalty for failure to file. 86

44 Invenergy Wind sale to Terraform Tax Characterization. With respect to the acquisition of the interests in the Acquired Partnership, each of the Parties hereto agrees that, for each taxable year in which the Closing Date occurs, all income, gains, losses, deductions, credits and other tax incidents resulting from the operations of the Acquired Partnership shall be allocated, as between Seller and Purchaser, using the "closing of the books" method permitted by Treasury Regulations and Code SS The Seller shall deliver to the Purchaser a copy of the statement required under Treasury Regulations SS (a)(3) setting forth in reasonable detail a good faith calculation of the amount of any gain or loss attributable to Code SS 751 property, and the amount of any gain or loss attributable to capital gain or loss on the sale of the partnership interests in the Acquired Partnership. Each of the Parties agree that each party hereto shall file all its federal income Tax Returns consistent with the foregoing and (ii) the Parties shall make no elections or take any actions inconsistent with the such treatment unless otherwise required by Law. 88

45 TMCT, LLC Right to Make Section 754 Election. The Tax Matters Member may make or revoke, on behalf of the Company, all elections in accordance with Section 754 of the Code, so as to adjust the basis of Company property in the case of a distribution of property within the meaning of Section 734 of the Code, and in the case of a transfer of a Company interest within the meaning of Section 743 of the Code. Each Member shall, upon request of the Tax Matters Member, supply the information necessary to give effect to such an election. 89 Any Trust Member or Representative has the right to require the Tax Matters Member to make a Section 754 election. 90

46 Florida Asset Resolution The Company shall make an election in accordance with Section 754 of the Code, so as to adjust the basis of Company property in the case of a distribution of property within the meaning of Section 734 of the Code and in the case of a transfer of a Company interest within the meaning of Section 743 of the Code, and the Company shall not apply for permission from the Commissioner of the Internal Revenue Service to revoke such election without the prior written consent of each Member (not to be unreasonably withheld).. 91 Each of the Members shall, upon request of the Tax Matters Partner, supply the information necessary to give effect to such an election. 92

47 NIIT on Sale Gain Re-proposed Reg (Dec. 16, 2013) REG Gain on sale of passthrough entity is NII only to the extent of the inside gain on Section 1411 Property. 94

48 Section 1411 Property is: Passive Business Property Investment Property Trading Property Personal Use Property 95 NIIT Example (1): Alice materially participates in her 100% owned C corporation s business. All assets are business property except marketable securities with $20,000 built-in gain. 96

49 In 2015, she sells her stock and recognizes a gain of $900,000. The entire $900,000 is category three NII. 97 NIIT Example (2): Same facts as Example (1) except the entity is an S corporation. The only Section 1411 Property of the S corporation is the marketable securities. 98

50 Net Investment Income: The lesser of: $900, Chapter 1 gain or $20, Alice s share of inside gain on the Section 1411 Property 99 NIIT Example (3): Alice is a nonpassive partner in a business partnership and she recognizes a gain of $900,000 on the sale of her partnership interest. Assume $20,000 of built-in gain (Alice s share) on marketable securities ( Section 1411 Property ) 100

51 $20,000 of gain is NII The lesser of: $900, Chapter 1 gain or $20, Alice s share of inside gain on the Section 1411 Property 101 NIIT Example (4): Bill is the passive partner in a business partnership and he recognizes a gain of $900,000 on the sale of his partnership interest. Assume $20,000 of built-in gain on marketable securities ( Section 1411 Property ) 102

52 The entire $900,000 is category three NII If possible, use grouping rules to make Bill nonpassive 103 NIIT Example (5): ABCD Balance Sheet Assets Tax Basis FMV Cash $100,000 $100,000 Inventory $20,000 $100,000 Investment asset $80,000 $100,000 Goodwill $100,000 $100,000 Total Assets $300,000 $400,000 Partner s Outside Basis Capital Alice $75,000 $100,000 $75,000 Bob $75,000 $100,000 $75,000 Carol $75,000 $100,000 $75,000 Don $75,000 $100,000 $75,000 Total Capital $300,000 $400,000 Alice sells to Debra for $100,

53 Alice Materially Participates in the Partnership 105 Chapter 1 Income IRC sec. 751(a) If S stock, then $25,000 of capital gain 106

54 $5,000 of gain is NII The lesser of: $25, Chapter 1 gain or $5, Alice s share of inside gain on the investment asset Section 1411 Property 107 Possibly zero NII under the Optional Simplified Method which uses recognized income or loss (discussed below) 108

55 If Alice does not materially participate, then her entire gain is NII under sec NIIT Example (6): ABCD Balance Sheet Assets Tax Basis FMV Cash $100,000 $100,000 Inventory $20,000 $100,000 Investment asset $80,000 $100,000 Goodwill $100,000 $100,000 Total Assets $300,000 $400,000 Partner s Outside Basis Capital Alice $75,000 $100,000 $75,000 Bob $75,000 $100,000 $75,000 Carol $75,000 $100,000 $75,000 Don $75,000 $100,000 $75,000 Total Capital $300,000 $400,000 Alice sells to Debra for $95,000 (5% Discount) 110

56 Alice Materially Participates in the Partnership 111 Chapter 1 Income Gain Realized without $20,000 ($95K - $75K) IRC sec. 751 Sec. 751 Ord. Inc. - $20,000 ($80,000 4) Capital Gain $ 0 If S stock, then $20,000 of capital gain 112

57 $5,000 of gain is NII The lesser of: $20, Chapter 1 gain or $5, Alice s share of inside gain on the investment asset Section 1411 Property 113 Form 8960 $20,000 Adjustment -$15,000 $5,000 NII was $0 under the 2012 proposed regs. because the discount was all attributed to the 1411 Property 114

58 2-19 Optional Simplified Method Use the K-1s to determine NII 115 Optional Simplified Reporting: Multiply Chapter 1 gain by the following fraction. Numerator: seller s share of net income, gain loss, and deductions on Section 1411 property on K-1 in the year of disposition and two prior years (the Section 1411 Holding Period ) 116

59 Denominator: seller s share of all items of net income, gain loss, and deductions on K-1 in the Section 1411 Holding Period. 117 Conditions for Simplified Method 1) 5% or less of the sum of separately stated income, gain, loss and deduction items (with loss and deductions as positive numbers) is attributed to Section 1411 Property during the Section 1411 Holding Period AND gain or loss is under $5 million. 118

60 Or 2) The gain or loss recognized does not exceed $250, Example (1): A owns a 50% interest in P a partnership. A sells the interest for $2,000,000. A s outside basis is $1,100,000 A s gain is $900,

61 1411 Property In Yellow Aggregate K-1 Income/Loss in 1411 Holding Period $1,800,000 X (Nonpassive to A) Y (Passive to A) ($10,000) Marketable Securities $20,000 Count negatives as positives 121 The 5% Test is Met: 1) 30,000/1,830,000 = 1.6% (under 5%) AND 2) Gain is under $5 million 122

62 Application of Simplified Method Property In Yellow Aggregate K-1 Income/Loss in 1411 Holding Period $1,800,000 X (Nonpassive to A) Y (Passive to A) ($10,000) Marketable Securities $20,

63 Numerator: seller s share of K-1 net income, gain loss, and deductions on Section 1411 property in the year of disposition and two prior years (the Section 1411 Holing Period) $10,000 (-$10,000 + $20,000) 125 Denominator: seller s share of all K-1 items of net income, gain loss, and deductions in the Section 1411 Holding Period. $1,810,

64 Gain in NII = $4, ($900,000 x 10,000/1,810,000) 127 Primary Method v. Optional Method If Eligible 128

65 The Primary Method of determining NIIT from a sale of a partnership Interest works from unrealized gain or loss. 129 The Simplified Method hinges on realized and recognized income and loss on the K-1s 130

66 Return to NIIT Ex (5) above: ABCD Balance Sheet Assets Tax Basis FMV Cash $100,000 $100,000 Inventory $20,000 $100,000 Investment asset $80,000 $100,000 Goodwill $100,000 $100,000 Total Assets $300,000 $400,000 Partner s Outside Basis Capital Alice $75,000 $100,000 $75,000 Bob $75,000 $100,000 $75,000 Carol $75,000 $100,000 $75,000 Don $75,000 $100,000 $75,000 Total Capital $300,000 $400,000 Alice sells to Debra for $100, Alice Materially Participates in the Partnership 132

67 Primary Method $5,000 of gain is NII The lesser of: $25, Chapter 1 gain or $5, Alice s share of unrealized inside gain on the investment asset Section 1411 Property 133 Simplified Method If we assume that the investment property is not rented, then the recognized income from 1411 property is likely zero (thus the NIIT is zero) - no recognized income. 134

68 Information Reporting Transferors who use the primary method must generally obtain from the Passthrough Entity the share of unrealized net gain or loss from the deemed sale of the Section 1411 Property. 135 However, the proposed regulations only require the Passthrough Entity to provide this information to transferors that are ineligible for the optional simplified reporting method 136

69 If a transferor qualifies but does not use the optional simplified reporting method, the transferor must negotiate with the Passthrough Entity the terms under which the information will be supplied. 137 Proposed Effective Date Taxpayers may rely on these proposed regulations for purposes of compliance with section 1411 until the issuance of these regulations as final regulations. See (f)