Late Add to Tax Bill Toughens Partnership ‘Disguised Sale’ Rules

May 23, 2025, 6:55 PM UTC

A last-minute addition to the House tax bill appears to give a prominent senator a small victory by enacting a previous proposal of his aimed at preventing abuses in partnership transactions.

The little-noticed provision tinkers with the language of a tax-code section on partners’ contributions to and distributions from their partnerships. This would accomplish something that Sen. Ron Wyden (D-Ore.) had proposed four years ago: Make sure that partners aren’t allowed to structure transactions as so-called “disguised sales” in an effort to avoid taxes.

The provision “seems to be designed to broaden the scope” of the disguised-sale rules, said Glenn ...

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