Partnerships — Disposition of Partnership Interests or Partnership Business; Partnership Termination (Portfolio 718)
This Portfolio provides a detailed discussion of the tax consequences of dispositions of partnerships.
Tax Portfolio, Partnerships — Disposition of Partnership Interests or Partnership Business; Partnership Termination, No. 718, provides a detailed discussion of the tax consequences of dispositions of partnerships, including those arising from taxable sales and nonrecognition dispositions of all or a part of a partner’s partnership interest (other than liquidation of partnership interest on withdrawal of a partner, which is the subject of another Portfolio), from sales of interests by all partners as a means of disposing of the partnership business, from sales or nonrecognition dispositions of the partnership business or assets, from structural changes in the tax partnership, and from termination of the tax partnership, which is not synonymous with discontinuation of the partnership business. As with all other aspects of partnership taxation, the dual nature of a partnership for tax purposes — as at times an aggregation of its partners, and at times an entity — complicates the discussion, particularly, because no one, including the author, has been able to articulate a comprehensive statement of when the aggregate, and when the entity, aspect should predominate. Further complication arises because the “tax” partnership includes not only entities organized as general or limited partnerships under state law, but also the newer forms of limited liability partnerships, primarily for professionals, and the, increasingly popular, limited liability company.
The discussion in this Portfolio involves not only analyzing the relevant statutory and regulatory materials, but also the large body of case law, revenue rulings, and other IRS pronouncements, including technical advice memoranda and private letter rulings, that are all part of this, unfortunately complex, body of tax law.
After a brief Introduction in Part I, Part II discusses the consequences for the transferor, the transferee, and the partnership (the continuing partners) from sales, including disguised sales, of partnership interests, including distinguishing sales from withdrawals (which are considered in detail in 716 T.M., Partnerships — Current and Liquidating Distributions; Death or Retirement of a Partner); abandonment of the interest; nonrecognition transfers, including the special issues for the successor to a deceased partner; the possible termination of the partnership as a result of sales and exchanges of partnership interests, tax allocations for the year of sale; and suspended losses of transferor partners. Part III deals with taxable sales and other dispositions of the partnership business and assets, including mergers, incorporations and changes in form.
Table of Contents
II. Disposition of Partnership Interests; Partnership Termination
III. Disposition of the Partnership Business and Assets; Structural Changes
Professor of Law Emeritus and Dean's Distinguished Scholar for the Profession Emeritus
University of Miami