Think Outside the Tax Box
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Think Outside the Tax Box
Just How Hot Should Section 751 Be - 05-01-25
Tax rules are generally designed with a purpose in mind. Most rules serve to define the tax base and tax rates. Many others serve to serve a behavioral purpose to encourage or discourage certain activities. The focus of this podcast stems from tax rules that are a combination of favoring certain activity such as generation of capital gains, and a limitation on such gains for certain taxpayers, such as the so-called “hot assets” rule for partners under IRC Section 751, Unrealized Receivables and Inventory Items. While Section 751 has been in the tax law for decades, a new application of it was raised by both the IRS and California FTB. This podcast summarizes Rawat, TC Memo 2023-14, rev’d, No. 23-1142 (DC Cir., 2024), and FTB Legal Ruling 2022-02, and offers observations on their relevance to tax research and practice.
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