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.This podcast is meant for entertainment purposes only. For the more thorough, complete, and accurately written version of this article which includes citations, visit us at http://www.tottb.tax