Partnership transfers rental properties to individual partners

[KC-CPA]

I have a partnership with 4 rentals, the two partners 50/50 have decided (actually they decided in October of 2013) to no longer be partners and transferred the properties to each other (both their names were on the properties and loans), each partner got 2 of the properties, they did use an attorney to transfer the properties and draw up the paperwork for liability of the loans.

No cash was exchanged they both just agreed to take the properties and associated loans and go forward with the rental properties separately. I have not had a transaction where the partners did not sale the properties but split them.

I plan to file the 1065 as final and move the rentals to their schedule E on their individual return, do I show the properties as sold at basis to remove them from the partnership balance sheet. Not sure how to treat the transfer and what other items I need to consider.

Any advise or direction is appreciated.

[Roland Slugg]

First of all, this should never have been treated as a partnership for tax purposes. It was jointly held property, and each co-owner should have just reported his 50% of the income and expenses for each property on his own return every year.

I believe the bifurcation of the four properties ... I'm assuming each co-owner got two of the properties ... should be treated as simultaneous like-kind exchanges. Report of F-8824.