#IRC 704 HOW TO#
#IRC 704 CODE#

No special appraisal is required to identify the fair market value in maintaining the books under section 704 (b). Similarly, if the property is distributed, the capital account of a distributee should be debited with the fair market value of that property.

For example, if a property is contributed by a partner as a part of a partnership business, then under the section 704 (b), capital account for the contributing partner must be credited with the FMV or fair market value of that property. According to the regulations defined in 704 (b), capital accounts should be maintained as per the specific rules that are neither a part of GAAP or tax. But the aim of 704 (b) books is to disclose the substantial economic effect of the allocation among partners.

What is 70 4 (b)?ДЄs already discussed, books prepared in accordance with the rules of GAAP are based on financial accounting principles. These books are known as Section 704 (b) books, and these books are prepared in accordance with the rules defined under the Section 704 (b), and try to depict the economics of the deal. However, there is another set of books that should be maintained by businesses, but are often not.

#IRC 704 CODE#

One book is maintained on the basis of Generally Accepted Accounting Principles, and the other one is based on the tax basis.Д«ooks, maintained on the basis of Generally Accepted Accounting Principles (GAAP), record business transactions according to the rules defined by the financial accounting board, whereas, in the tax books, transactions are recorded according to the rules of the Internal Revenue Code to calculate the taxable income. For example, there are many partnership businesses and limited liability companies (LLC) that are taxed as partnership businesses, where you are required to maintain two types of books.

#IRC 704 HOW TO#

Without knowing how to maintain your books, and what the different ways are to maintain them, you may not be able to properly present the information to people associated with the business. Whether it is a partnership business, an entrepreneurship, or a corporate business, understanding the basics to account for business transactions is very important for the smooth running of business.

Irc 704