Accounting Method Switches Allowed for Partnership Changes

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July 31 — Internal Revenue Service final rules on determining a partner's distributive shares allow partnerships greater flexibility in how they account for variations.

The final rules (T.D. 9728), issued July 31, say that the partnership may select a new method each time a variation occurs, moving back and forth between the interim closing method and the proration method when accounting for changes, such as when a new partner joins, or a partner sells a partnership interest.

“In rules the IRS proposed in 2009, no matter how many variations occurred during the taxable year, whether it was two or 10, the partner had to use the same method to account for every one of those changes,” Michael J. Grace, counsel with Whiteford Taylor & Preston LLP, told Bloomberg BNA July 31.