Partnership - closing the books for 50% partner change

[Gretel]

It is my understanding that this means to get a snapshot on the date this change occurs, like allocating all income and expenses and depreciation as though the entity would change. This information then is used to be able to do the K-1's correctly at YE. After that business continues as usual. Is this correct?

Also, the partner buying out the other partner (3 partners all together), does just his outside basis increase or do assets get a step up?

[ChEAr$]

It is my understanding that this means to get a snapshot on the date this change occurs, like allocating all income and expenses and depreciation as though the entity would change. This information then is used to be able to do the K-1's correctly at YE. After that business continues as usual. Is this correct?

Also, the partner buying out the other partner (3 partners all together), does just his outside basis increase or do assets get a step up?

As I understand it the partnership consisted of only 3 partners and one bought out the other two. At this point you no longer have a partnership and the final 1065 needs to be filed.

[Gretel]

As I understand it the partnership consisted of only 3 partners and one bought out the other two. At this point you no longer have a partnership and the final 1065 needs to be filed.

I tried to be clear than one partner is buying out another partner by indicating there are 3 altogether. Anyway, thank you, Harlan, for bumping up my post. Now it get's another bump. Hope your tax season was good.

[Lion]

What were the percentages? If 50% or more of the ownership changed hands, the partnership ended on that date anyway.

[Burke]

Sounds to me like there were 3 partners. If equal, each owned 33.33%. Unfortunately, the actual percentages were not given. If equal, and one bought out one, and now there are two @ 50%, then yes the partnership changed on the date of transition for tax purposes. To me, its easier to do 2 1065's -- one ending on that date, and the other from that date to YE. Anyway, assets would increase for the remaining 2 partners only for basis purposes, if that is what you were asking, depending on how the interest was valued.

[Gretel]

%

37.5% partner bought out 50% partner, now owns 87.5%. Are you saying the partnership ended and needs to file for a new EIN?

Well, I know now that this is what is happening. Full Monty, with State and Federal, or Federal only?

[Gretel]

What now?

What happens now? I am not actually the one doing the tax return but need to advise the property management company. F.e. Rents were collected but only 40% belongs to "old" partnership. I assume they need to be taxed fully in that entity. Any advise?
The closing is supposed to be tomorrow. We probably need to do a meter reading for utilities as well. I won't have a good night.

[Gretel]

Got my answers

Now that I know that this is called a "technical termination" I also found information on the internet.