S.Amdt. 4479

This amendment, submitted by Mr. Wyden, aims to introduce a series of Partnership Reforms to the Internal Revenue Code of 1986. Its primary purpose is to change how partnerships handle taxes, allocations, and reporting to prevent tax avoidance and ensure tax consequences reflect economic realities.

The amendment intends to add or change the following:

• Distributive Shares: It introduces a "consistent percentage method" for "covered partners" in "covered partnerships" to determine their share of income, gain, loss, deductions, or credits.
• Taxation of Gains: It mandates the use of a remedial method for sharing income and gains from contributed property and removes the 7-year time limit on taxing precontribution gains.
• Revaluation and Distributions: It establishes rules for "revalued property" during specific "revaluation events" and repeals certain rules regarding liquidating distributions for retired or deceased partners.
• Debt and Basis: It requires partnership liabilities to be allocated based on a partner's share of profits (with some exceptions) and limits certain basis adjustment elections to "qualified small business partnerships."
• High Income Tax: It expands the Net Investment Income Tax to include trade or business income for individuals exceeding specific high-income thresholds ($400,000 for individuals; $500,000 for joint returns).
• Other Changes: It modifies the recognition of gains for transfers to swap funds, updates how worthless partnership interests are treated as losses, and codifies an anti-abuse rule allowing the Secretary to modify transactions to reflect their actual substance.