A Partnership Mark-to-Market Tax Election

49 Pages Posted: 11 Jan 2017 Last revised: 31 Jan 2018

See all articles by David Hasen

David Hasen

University of Florida Levin College of Law

Date Written: January 7, 2017

Abstract

The rules of subchapter K of the Internal Revenue Code impose substantial compliance burdens on partnerships and substantial administrative burdens on the government. Heavy compliance burdens may make the option to have periodic deemed realizations of gains and losses on partnership assets attractive to many partnerships. Although deemed realizations would impose valuation costs and a slightly higher expected tax liability for partners than they bear under current law, for many partnerships, the tradeoff likely would prove worthwhile, especially if partners could continue to take advantage of the long-term capital gain preference for gains that would be taxed at preferential rates in the absence of deemed realizations.

This article describes some of the compliance burdens that partnerships face and proposes a partnership election that would provide for mark-to-market taxation of partnership property. The article also describes two secondary elections for partnerships making the mark-to-market election. One would preserve capital gain treatment for assets that would be subject to such treatment in the absence of the mark-to-market election; the other would reduce valuation costs.

Keywords: Business Taxation, Partnership Taxation, Tax Policy

JEL Classification: H2, H25, K34

Suggested Citation

Hasen, David, A Partnership Mark-to-Market Tax Election (January 7, 2017). Tax Lawyer, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2895382 or http://dx.doi.org/10.2139/ssrn.2895382

David Hasen (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

HOME PAGE: http://https://www.law.ufl.edu/faculty/david-hasen

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