Abstract
Subchapter K of the Internal Revenue Code has historically afforded considerable flexibility in determining the federal income tax consequences of the retirement or withdrawal of a partner from a partnership. In general, the departure of a partner can be structured either as a purchase of the retiring partner’s interest by the remaining partners or as a liquidation of the partner’s interest by the partnership. Although these two transactions are essentially similar in economic consequences, they have been governed by two separate sets of provisions in Subchapter K, often resulting in significantly different tax consequences. The sale of a partner's interest is governed primarily by sections 741 and 751(a), whereas the liquidation of a partner's interest by the partnership is governed primarily by section 736.
Part II of this article describes the tax treatment resulting from the sale and the liquidation of a partnership interest prior to the enactment of OBRA 1993. Readers already familiar with this area may wish to proceed directly to part III, which analyzes the specific amendments made to prior law. Part IV concludes by summarizing and commenting upon these amendments and their effects on partners and partnerships.
Recommended Citation
James E. Tierney,
Reassessing Sales and Liquidations of Partnership Interests After the Omnibus Budget Reconciliation Act of 1993,
1 Fla. Tax Rev.
(1994).
Available at: https://scholarship.law.ufl.edu/ftr/vol1/iss1/17