Section 751 and Hot Assets (1 CE)
July 26, 2021
11:00 AM to 11:50 AM PT
COURSE DESCRIPTION
When a partner starts the negotiation process to sell their interest they may not consider the tax treatment of Hot
Assets. Hot Assets are business assets that if sold have the potential to create ordinary income. This is important to
keep in mind because the partner is probably not aware these rules even exist. The three best examples of Hot Assets
are Accounts Receivable, Inventory, and ordinary income depreciation recapture under Sections 1245 and 1250.
Hot Assets is not a term that was created by FASB or GAAP but under IRC Section 751 to classify certain types of assets
during a partner’s sale of their interest {Regs. Sec. 1.751-1(a)} or certain distributions {Regs. Sec. 1.751-1(b)}. This term
was created from the concern that a partner leaving his interest in a company would receive special long-term capital
gains treatment.
Congress established this rule to reduce or eliminate preferable capital gains treatment for a partner selling their
interest of the partnership.
Learning Objectives:
Distinguish the categories of Hot Assets
Analyze the three (3) steps necessary to be calculated on every calculation regarding IRC Section 751
Extrapolate issues lurking in the tax code that can emerge and cause tax pain to our clients
Interpret why similar types of entities do not always result with the same tax results
Discuss Form 8308
Provide detail examples to demonstrate how Section 751 applies to the sale of partners’ interest
AJ Reynolds, EA
Allan J “A.J.” Reynolds, EA has immense experience in various areas in taxation, which
encompasses over 30 years. His practice centers on Individual, Business and Estate Tax
preparation. In addition, A.J. specializes in IRS Audits, Appeals, Collections, and other Tax
Representations. His clientele ranges from the average worker to fortune 500 executives.
He speaks for Basics + Beyond Income Tax Seminars, Center for Agriculture Law and
Taxation of Iowa State University, NTI Resort Conferences, and NATP. A.J. started his tax
career with a National CPA firm in San Diego, CA after proudly serving five years in the US
Navy.
