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Kate Kraus, partner at Allen Matkins Leck Gamble Mallory & Natsis, participated in a video interview during Nareit’s REITwise: 2024 Law, Accounting & Finance Conference held March 19-21 in Hollywood, Fla.

Kraus shed light on the intricacies of the Bipartisan Budget Act (BBA) partnership audit regime. Kraus, who authored the Bloomberg BNA tax management portfolio on the subject, explained the significant changes brought about by the BBA audit rules.

“The BBA audit rules are a new approach for IRS audits of partnerships,” Kraus explains. “The goal was to simplify procedures...but they created a bunch of new complicated procedural rules.”

Kraus highlighted unexpected challenges that partnerships may encounter, such as previously inconsequential tax return items now potentially leading to substantial tax liabilities.

“Under the BBA audit rules, if there's an adjustment to that line on the return, that can result in a tax liability that the partnership has to...pay attention to,” she noted.

Offering advice on pre-audit preparations, Kraus emphasized the importance of meticulous attention to detail. She also stressed the significance of understanding decision-making dynamics within the partnership, as this can profoundly impact post-audit outcomes.