Collapsible Real Estate Partnership Proposal
5 Pages Posted: 1 Apr 2008 Last revised: 12 Sep 2015
Date Written: August 7, 2008
Professor Burke proposes extending the look-through rules of section 1(h)(9) to partnership distributions as well as sales of partnership interests to prevent conversion of unrecaptured section 1250 gain and potentially indefinite deferral. The proposal addresses flaws in the distribution rules as illustrated by Countryside Limited Partnership v. United States allowing tax-free treatment of a distribution of recently-acquired nonmarketable securities to a redeemed partner, coupled with shifting of basis from the securities to depreciated real property held by the partnership. Corresponding changes would be necessary to the regulations under sections 751 and 755 when a disproportionate distribution reduces the distributee's share of unrecaptured section 1250 gain in retained partnership property. The proposal flows from Professor Burke's earlier commentary on Countryside (Tax Notes, Mar. 31, 2008, p. 1393).
Keywords: partnership, real estate, distribution, Countryside, basis, economic substance
JEL Classification: K34
Suggested Citation: Suggested Citation