Practitioner’s Tax Action Bulletin® Advisory
In June 2024, the IRS released a guidance package on related party basis adjustments (RPBAs) that includes Prop. Reg. 1.6011-18, Notice 2024-54, and Revenue Ruling 2024-14. These pronouncements aim to prevent related parties from benefitting from certain basis-shifting transactions using partnerships where their overall economic situation is unchanged. Typically, in these so-called covered transactions, tax basis is shifted to assets subject to cost recovery (i.e., depreciation, amortization, or depletion) under the rules for adjusting the basis in partnership assets under IRC Sec. 734 (when partnership distributions are made) and IRC Sec. 743 (when partnership interests are sold or exchanged) or the rules for adjusting the basis of distributed property in the receiving partner’s hands under IRC Sec. 732.
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