Revenue Ruling 2024-14 advises taxpayers of the Service’s position challenging certain partnership related-party transactions under the codified economic substance doctrine in § 7701(o).  Under the ruling, the Service applies the economic substance doctrine in three situations involving related parties where some or all of whom are partners in a partnership, and the parties: (1) create basis disparities through various methods; (2) capitalize on these basis disparities either by transferring a partnership interest in a nonrecognition transaction or by making a current or liquidating distribution of partnership property to a partner; and (3) claim a basis adjustment under §§ 732(b), 734(b), or 743(b).  The ruling holds that these transaction structures lack economic substance under § 7701(o).  In such cases, the Service will disregard the basis adjustments.

Revenue Ruling 2024-14 will be published in Internal Revenue Bulletin 2024-28 on July 8, 2024