Discussion:Sale of Partnership interest over 50%
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Sale of Partnership interest over 50%
| 22 June 2006 | |
| I have a client that is buying his 50% partner out. Under code 706 once you have 50% or more of a partnership's interest change hands in any given 12 months you must terminate the partnership as of the date of the sale.
Therefore, I am going to create an LLC, single member, and transfer all the assets, equity and liabilities into his new LLC. For example Assume the partnership has $100k in building assets and no liabilities and each have an equity of $50K. If he buys the partnership interest for $100 then the following will be on the new LLC's books on day one: Building Assets $100k Goodwill $50k Owners Equity $150k Please advise me if I am correct on the termination of the partnership on the date of the sale and the deposit of the assets and equity on the books of the new LLC.
| |
| 22 June 2006 | |
| You are correct about the termination of the partnership for two reasons. The 50% ownership change is a technical termination and also, in your case, after the sale there is only one owner so it isn't a partnership. I'm not too sure about how you are booking the new LLC assets. Is the $50K goodwill or is he purchasing 1/2 the building? I would vote for 1/2 the building. What is FMV of the building? | |
| 22 June 2006 | |
| Take a look at 751 and following, there's an opportunity here to step up the basis in the building I think. | |
To join in on this discussion, you must first
log in.
