Partnership Debt Allocation Tax Rules End Years of Uncertainty

Final IRS regulations on partnerships 11 years after the rules were proposed makes good administrative sense as the agency’s pass-through unit pushes its initiative to strengthen enforcement of certain tax schemes.

The agency released final rules for partnership recourse liability allocation that said taxpayers should use the economic risk of loss method to allocate debt when multiple partners personally guaranteed the debt. The regulations are among 16 projects listed on the IRS’s 2024-2025 Priority Guidance Plan.

Finalizing these rules now is “good housekeeping,” said Mike Kaercher, deputy director at the Tax Law Center at New York University School of Law, ...