TAX 655._ Discussion_ Week 8_ Post 4

When one of the partners decides or is ready to retire from a partnership formed, there are

many options in liquidation to end the relationship. b Each one of these options is based on the

tax consequences for the partner leaving and the ones staying. b According to Antico (2013),

“When offering a new equity position or buying out a retiring partner, considerations vary

depending on the structure of the practice, so it is important to note the differences when

dealing with a partnership, as distinguished from a corporation. The appropriate structure of

a practice depends on the needs and desires of the practice owners”. b Now having this in

hand, the option I will pick and be beneficial for every partner is Option 1, just because it is

considering and giving opportunities equally to everyone. b We have to remember that Carol

The sale of a partnership interest is treated as the sale or exchange of a capital asset,

so normal taxes will be applied to this sale. b The gain or loss will be calculated as the

difference between the amount realized in the transaction and the selling partner’s adjusted

basis in the partnership interest being sold. b In case of death, the purchaser’s basis is

determined under normal tax rules, by cost, and according to Section 1015. Also, this death

of a partner can lead to tax issues involving the close of a partnership's tax year with respect

to the deceased partner, a possible change in the partnership's year-end, post-death allocation

of income, Sec. 754 elections, and Sec. 743 adjustments, among other things.

References

The Tax Consequences of Partnership Break-Ups: A Primer on Partnership Sale...: Multi-Search

(snhu.edu)

When one of the partners decides or is ready to retire from a partnership formed,

there are many options in liquidation to end the relationship. b Each one of these options is

based on the tax consequences for the partner leaving and the ones staying. b According to

Antico (2013), “When offering a new equity position or buying out a retiring partner,

considerations vary depending on the structure of the practice, so it is important to note the

differences when dealing with a partnership, as distinguished from a corporation. The

appropriate structure of a practice depends on the needs and desires of the practice owners”. b

Now having this in hand, the option I will pick and be beneficial for every partner is Option

maybe in the future.

The sale of a partnership interest is treated as the sale or exchange of a capital asset,

so normal taxes will be applied to this sale. b The gain or loss will be calculated as the

difference between the amount realized in the transaction and the selling partner’s adjusted

basis in the partnership interest being sold. b In case of death, the purchaser’s basis is

determined under normal tax rules, by cost, and according to Section 1015. Also, this death

of a partner can lead to tax issues involving the close of a partnership's tax year with respect

to the deceased partner, a possible change in the partnership's year-end, post-death allocation

of income, Sec. 754 elections, and Sec. 743 adjustments, among other things.

References

Antico, S. R. (2013). Understand tax implications of practice buy-ins, buy-outs: structure

agreements carefully to maximize benefits when an owner or partner leaves or is brought

Simmons, D. L. (2013). The Tax Consequences of Partnership Break-Ups: A Primer on Partnership

Sales and Liquidations. Tax Lawyer, 66(3), 653–731.

The Tax Consequences of Partnership Break-Ups: A Primer on Partnership Sale...: Multi-Search

(snhu.edu)