October 27, 2026

Live Webcast

2 CPE Credits

Don Farmer's Hot Assets & IRC 751: Avoiding Surprises on PartnershipSales

October 27, 2026
Live Webcast
2 CPE Credits

Don Farmer's Hot Assets & IRC 751: Avoiding Surprises on PartnershipSales

  • View Bio

    Instructor

    Nick
    Preusch

    View Bio

    Nick Preusch, CPA, JD, LLM, MSA

    Bio

    Nick joined YHB in 2020 with over 15 years of experience in the industry. Nick is a graduate of Carthage College with a BS in Accounting and Business, the University of Connecticut with an MA in Accounting, Case Western Reserve University with a JD, and Georgetown University with an LLM in taxation. Nick has also worked with the Internal Revenue Service as a Revenue Agent and an Attorney with the IRS Office of Professional Responsibility.

    EXPERTISE

    Nick’s expertise includes helping high wealth individual and large business entities with complex tax compliance, along with specializing in international, non-for-profit tax issues, and tax ethics issues. He has used his tax expertise not only to serve his clients, but also his peers. He has authored publications for the AICPA’s Journal of Accountancy, AICPA’s Tax Advisor, NATP’s Tax Pro Journal, and CCH’s Journal of Tax Practice and Procedure and co-authored a textbook, Tax Preparer Penalties and Circular 230 Enforcement, published by Thomas Reuters. He has also lectured nationally on topics such as ethics, complex tax transactions, and IRS practice and procedure.

Sales of partnership interests can trigger unexpected ordinary income when “hot assets” under IRC §751 are involved. Many practitioners focus on capital gain treatment under IRC §741, only to discover that unrealized receivables and inventory items require recharacterization of a portion of the gain as ordinary income. This focused 2-hour program provides a practical and technical review of IRC §751 and its application to partnership interest sales and certain distributions. Participants will examine the definition of hot assets, the mechanics of ordinary income recharacterization, and the calculation of a partner’s share of unrealized receivables and inventory. The course also addresses common pitfalls, planning considerations, and documentation strategies to avoid costly surprises for clients. Through examples and case-based discussion, attendees will gain clarity on how to identify §751 property, compute the ordinary income component of a sale, and properly report partnership interest transactions.

Learning Objectives

Upon completion of this program, participants will be able to: 1. Identify “hot assets” as defined under IRC §751, including unrealized receivables and inventory items. 2. Differentiate between capital gain treatment under IRC §741 and ordinary income recharacterization under IRC §751. 3. Calculate the ordinary income component arising from the sale or exchange of a partnership interest. 4. Determine reporting requirements and compliance considerations related to partnership sales involving §751 property. 5. Recognize common planning opportunities and traps associated with hot assets in partnership transactions.

Major Topics

MAJOR TOPICS Overview of Partnership Interest Sales • General rule under IRC §741
• Capital asset treatment of partnership interests
• Interaction with Subchapter K principles Definition and Scope of Hot Assets (IRC §751)
• Unrealized receivables o Depreciation recapture (§1245 and §1250) o Accounts receivable for cash-basis partnerships o Ordinary income recapture items
• Inventory items o Substantially appreciated inventory o Determining fair market value Mechanics of §751 Recharacterization
• Allocation of gain between capital and ordinary income
• Determining a partner’s share of §751 property
• Impact of inside vs. outside basis
• Effect of liabilities under IRC §752 Distributions and §751(b)
• Disproportionate distributions
• Exchanges of hot assets for other property
• Ordinary income recognition in rebalancing transactions Reporting and Compliance Considerations
• Form 4797 and Schedule D implications
• Partnership reporting responsibilities
• Disclosure considerations
• Documentation and valuation challenges Planning Considerations and Risk Management
• Transaction structuring strategies
• Timing considerations
• Due diligence in partnership interest acquisitions
• Common practitioner errors and audit risk areas

CPE Credits Available

2 CPE Credits
2
Taxes

Things to Know About This Course

Course Level

  • Intermediate

Professional Area of Focus

  • Tax; Taxation

Prerequisites

None

Advanced Preparation

None

Provider

Don Farmer Tax Education

Register For This Event

  • MACPA Member

    $ 115 115
    Join

  • MACPA Non-Member

    $ 215 215
    Your Price

Please login to register.