Dispositions and Partial Dispositions of a Partnership Interest

Abstract:     
While the computation of gain or loss on the sale of a partnership interest seems easy to determine, it can be problematic if some but not all of the partner's interest is sold. In addition, if the selling partner has been allocated a share of the entity's indebtedness under section 752, a naive application of the usual debt allocation rules can produce results that are inconsistent with the underlying economics of the transaction. Finally, determining the ancillary tax consequences of the sale including the proper post-sale sharing of built-in asset gain can be complex, especially when the selling partner has received a debt-financed distribution prior to the partial disposition. Fortunately, by ensuring symmetric tax consequences between the selling and purchasing taxpayers, sensible results can be reached.

Number of Pages in PDF File: 17

Keywords: law, tax, partnership tax

JEL Classification: K34

working papers series