New York City issues Statement of Audit Procedure on application of IRC Sections 734 and 743 under the Unincorporated Business Tax

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May 16, 2017

Overview

The New York City Department of Finance (Department) recently issued a Statement of Audit Procedure (SAP) addressing the application of Internal Revenue Code (IRC) sections 734 and 743 to the New York City Unincorporated Business Tax (UBT). The SAPs are used by Department audit staff for guidance on various audit-related matters and may be useful in understanding the audit process.

In the SAP, the Department concluded that the UBT incorporates IRC section 734 basis adjustments into the computation of unincorporated business taxable income. However, unincorporated business taxable income may not change in connection with an IRC section 743(b) adjustment where the taxpayer is not the transferee of a partnership interest since the adjustment only affects a transferee’s income, gain, loss, and deduction.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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