More on Collapsible Real Estate Partnerships
4 Pages Posted: 19 Sep 2008
Date Written: September 18, 2008
The commentary explains the operation of the section 1(h)(6)(B) limitation on gain taxed at 25% when a partner's only capital gain for the year consists of unrecaptured section 1250 gain on sale of a partnership interest. As clarified by the preamble to the final regulations, the section 1(h)(6)(B) limitation should be irrelevant in this situation, so that the selling partner's entire unrecaptured section 1250 gain is taxed at 25% (rather than the 15% rate for residual capital gain). While the preamble should dispel any confusion concerning the proper operation of the section 1(h)(6)(B) limitation under existing law, the problem would not arise if the character of section 1231 gain were preserved under the look-through rules applicable to sales of partnership interests.
Keywords: partnership, real estate, capital gain, sale of interest, redemption, basis adjustment, 751, 1(h)
JEL Classification: K34
Suggested Citation: Suggested Citation