Partnership Excange and Treasury reg 1.708-1

[Super Mom]

Hi! Just want to double check with you all and see if I'm understanding this right. I am quoting from reg 1.708-1 concerning terminations of partnerships:

"Fifty percent or more of the total interest in partnership capital and profits means 50% or more of the total interest in partnership capital plus 50% or more of to the total interest in partnership profits. Thus, the sale of 30% interest in partnership capital and 60% interest in partnership profits is not the sale or exchange of 50% or more of the total interest in partnership capital and profits."

Therefore, I'm thinking an exchange of 49% of profit and 50% in capital as per the partnership agreement, will fit this paragraph and will not trigger a technical termination. Correct?

[TXEA]

I would agree - just make certain that there are no other changes in capital or profits in the last 12 months and tell them no more for the next 12 months after this transfer.

[Super Mom]

I can understand no more exchanges in 2014 if was Jan 1---but why not 2015?

[TXEA]

The technical termination rules apply if the transfers of 50% capital and profits occur in 12 month period. It is not determined by tax year of a partnership.

For example, 40% cap and prof interest transfers on 9/30/14 (for a 2014 calendar year) and a DIFFERENT or ADDITIONAL 15% profit and cap interest transfers on 6/30/15. There is a technical termination in this instance since the total is 55% and it occurred in a 12 month period.

If the same cap and profits interest transfers ( in other words transferred on 9/30 and then the buyer of 9/30 transfers the same interest on 6/30 to different buyer), then I do not think the technical termination occurs (but I would have to check).