Final regulations: Recourse partnership liabilities and related party rules under section 752
Final rules adopt proposed regulations issued in December 2013
The U.S. Treasury Department and IRS today released final regulations (T.D. 10014) under section 752 relating to recourse liabilities of a partnership and special rules for related persons.
The proposed regulations, in part, implemented the result in IPO II v. Commissioner, 122 T.C. 295 (2004), which applied the related partner exception to turn off relationships between partners and allocated the entirety of a partnership’s liability to the partner that directly bore the economic risk of loss (EROL) for the partnership’s liability despite a non-partner related person also bearing the EROL. The final regulations adopt the proposed regulations issued in December 2013, with certain modifications in response to the several comments received on the proposed regulations
The final regulations apply to any liability incurred or assumed by a partnership on or after December 2, 2024, subject to a binding contract provision.
- Partnership liabilities refinanced after that date (to the extent allocable under section 1.163-8T to an existing liability of that partnership) are not treated as incurred or assumed after that date to the extent of the amount and duration of the pre-modification liability.
- A partnership may apply the final regulations to all liabilities incurred or assumed by a partnership (even liabilities incurred or assumed before that date), with respect to all returns, including amended returns, filed after the date the final regulations are published in the Federal Register, provided the partnership consistently applies all the rules in these final regulations to those liabilities.