Partnership terminations can provide substantial tax savings opportunities
Article Abstract:
Termination of a partnership, whether desired or unwanted, can be burdensome to departing and continuing partners, estates, and surviving spouses. Causes of partnership termination include: death, withdrawal, bankruptcy, retirement, or incompetency. Termination can result in ownership change. Outgoing partners' assets should be disbursed among new and existing partners. Partnerships can avoid termination provisions by: liquidating rather than selling shares; adding a new partner prior to an ownership shift; or financing the purchase price of a partnership. Death causes a legal termination but may not mean termination for tax purposes. Incorporating may be appropriate when termination is unavoidable. Three methods of incorporating partnerships are: contributing partnership assets to the corporation; liquidating and disbursing assets to partners; and partners contributing interests to the corporation.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1989
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Prop. Regs. show how to allocate gain to partners
Article Abstract:
The IRS has released Proposed Regulations mandating that built-in gain or loss arising from the contribution of property by a partner be allocated to the contributing partner by any reasonably fair method. The IRS, interpreting Section 704(c), has identified three methods which qualify as being reasonable: the traditional method, a variant of the traditional method that uses curative allocations, and the deferred sale method. Examples of how each of these methods are applied in determining the allocation of built-in gain or loss are provided. The Proposed Regulations also ouline a special rule that permits the bundling of several assets in the same general category as a single property for purposes of allocation.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1993
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Prop. regs. try to separate sales from contributions
Article Abstract:
The Proposed Regulations issued by the IRS provide guidelines regarding the taxation of property transfers between a partner and a partnership. The capacity in which the partner is acting in such a transaction determines its tax treatment. Regs. 1.721-(a) and 1.731-1(c)(3) were provided so that it would be easier to tell the difference between a sale and a contribution. The IRS closely examines the nature of the transfer, including the timing of the transaction, mode of payment, and liability distribution, and requires disclosure from taxpayers to prevent them from disguising sales or property exchanges as contributions.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1991
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