CAPITAL ACCOUNTS 704(b)

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CAPITAL ACCOUNTS 704(b) MINIMUM GAIN
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CAPITAL ACCOUNTS

• Increases to partners capital accounts
• Cash contributed
• Fair market value of property contributed
• Net of liabilities assumed by partnership
• Allocations of income or gain
• Decreases to partners capital accounts
• Cash distributed
• Fair market value of property distributed
• Net of liabilities assumed by partnership
• Allocations of loss or deduction, most credits

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TAX CREDITS



Developer
Investor
Limited Partnership
Capital Account
LOSSES
CREDITS
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Developer
Investor
Limited Partnership
Capital Account
LOSSES
CREDITS
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704(b) Issues

Developer
Investor
Limited Partnership
Does not receive credits or losses
Cannot use credits or losses Must pay an adjuster
to the Investor
Capital Account
LOSSES
CREDITS
704(b)!!!
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Minimum Gain

• What is it?
• Assumed sale of asset at year end
• Assumed sale price of non-recourse debt plus 1
• Gain is calculated
• Assumed Sale price less Net Book Value
• How does it help a 704(b) problem?
• Assumed Minimum Gain is allocated to partners
• Losses can continue to flow to partners with
  negative capital accounts
• Credits flow to the investor partner

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LIMITED PARTNER IRC 704(b) REALLOCATION
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Questions???

• Find FREE tax credit resources at

www.taxcredithousing.com
E-mail us at Dan.smith_at_novoco.com