Bill > S2094

This bill aims to prevent tax avoidance strategies involving basis shifting in partnerships between related parties. Specifically, the Basis Shifting is a Rip-off Act modifies existing tax rules to require recognition of gain in certain partnership distributions and transfers where partners are related. Under the new provisions, when a partnership distributes property that results in a basis increase to partnership assets, the partner receiving the distribution and the partnership itself may be required to recognize gain. The bill introduces an "applicable partnership" definition that generally applies to partnerships with two or more related partners, though small businesses meeting certain gross receipt tests are exempted. For related-party distributions, the bill mandates that gain must be recognized even in situations that would traditionally allow tax-free transfers. Additionally, the legislation increases accuracy-related tax penalties to 40% (up from 20%) for understatements involving these related-party partnership distributions. The changes would take effect for distributions and transfers occurring after June 11, 2025, and are designed to close tax loopholes that allow related parties to manipulate partnership asset basis to reduce tax liabilities. The bill explicitly states that these changes should not be interpreted as creating any presumption about the economic substance of such transactions.

Budget and Finance

https://www.congress.gov/bill/119th-congress/senate-bill/2094/all-info