Recent developments regarding partnership classification and income allocation

Article Abstract:

Two corporate characteristics for limited partnership classifications under Regulations section 301.7701-2 were clarified by revenue procedure 89-12: free interest transferability and continuity of life. Free interest transferability requires that any member with substantial interests has the power to transfer all interests to person outside of the organization and this characteristic holds if the general partner must give approval as long as the consent is assured. Continuity of life means that any one member leaving the partnership for any reason including death will not end the partnership.

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New rules for allocating basis among properties distributed by a partnership

Article Abstract:

Property distributed to a partner from a partnership is generally not taxable, but some provisions of the Taxpayer Relief Act of 1997 apply here. New rules use the fair market value of distributed assets to determine appropriate allocations. Some analysts regard this as more equitable than former rules, but there is potential conflict in partners making a different evaluation of market value than the partnership.

Taxation, Property

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Proposed regulations deal with when a distribution of marketable securities will be treated as a cash distribution

Article Abstract:

Proposed 1996 Treasury regulations will govern partnerships' distribution of marketable securities. These distributions will be treated as cash when the money distributed, including securities, exceeds adjusted basis partnership interests. The proposed rules also govern recognition of gain, exceptions, investment partnership treatment, and provide a definition of marketable securities.

Securities industry, Asset-backed securities, Asset backed securities

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