Removing Partnership Basis Regs

Citing President Trump's executive order on deregulation, the IRS, in Notice 2025-23, announced that it intends to remove basis-shifting regulations that target potentially abusive partnership transactions. The regulations were finalized in January of 2025. As background, the law allows partnerships to increase basis in their assets when participating in certain types of transactions to avoid recognizing gain twice. Because some partnerships attempt to manipulate the rules to achieve a stepped-up basis and improperly avoid taxation, the new regulations would have attempted to put a stop to transactions that lack real economic substance by imposing reporting obligations. The IRS identified four specific types of transactions as reportable transactions. Partnerships (and their material advisors) participating in identified related-party basis adjustment transactions and substantially similar transactions would have become subject to the disclosure requirements that apply to reportable transactions.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the IRS’ decision to remove the partnership anti-abuse regulations.

Below is a summary of the debate that ensued between the two professors.