Partnerships want to Dissolve ?

[Duane Anderson]

Two brothers who have been 50/50 partners for several years now want to quit. My client is the surviving partner and wants to transfer virtually all assets to new LLC's and the related liabilites which exceeds the assets value. My suspicion is that the other brother's wife who wants out wants $. Any assets / cash they take out would be taxable.

Can my client transfer assets and the liabilities to new LLC's and have no tax consequences. He just wants to be done with the family feud and move on ! They are in the shed construction and rental business. Also they have a couple of partnerships in land development which are owned by S corps.

Thanks for your help,,,,Duane Anderson

[Bees Knees]

You need to read TheTaxBook starting on page 20-11 under the heading Partnership Distributions. The answer to your question depends on a number of factors, including whether a partner receives cash, property, unrealized receivables, whether it is a payment in retiring a partner's interest, what is the partner's basis in the partnership, etc. Nobody can give you an answer without those specifics. In general, if someone gets cash in exchange for his/her entire interest, there is gain or loss recognized. If someone only gets property in exchange for his/her entire interest, basis transfers over to the property received with no gain or loss recognized on the transaction. But of course, there are always exceptions to these general rules, which you need to read up on.