Forfeited Partnership Interest

[BHoffman]

Partner A forfeited his interest in Partnership AB. The partnership agreement states that upon forfeiture, the assets transfer to Partner B.

No hot assets, no liabilities. Nothing except assets and equity.

Assets were:

Land basis $1,000
Securities basis $200
Real estate basis $100

Partner A held 99% before forfeiture. Partner B held 1%. Before the forfeiture, Partner B's total basis in the partnership was $100.

Upon forfeiture, the partnership terminated leaving all of the assets to Partner B.

What is Partner B's basis in the assets?

[DaveinTexas]

$100

Not to be funny but $100 would be the basis of the remaining partner as this wouldn't change because of the abandonment of the other partner. It sounds like the Partnership would terminate as well. Here is a decent article regarding abandoning partners: http://www.rutan.com/files/Publicati...sMartinson.pdf

Specifically, the article discusses capital account shifts to the other partners; may or may not be helpful but this is a good source of information for anyone with clients in this boat. This is a complicated issue with very little IRS or other guidance.

Just some final notes, if there are no liabilities relieved to the abandoning partner, the partner may realize an ordinary loss. If you rep the abandoning partner, this would be valuable information to them. Also, the abandoning partner should make their intention to abandon in writing to the partnership (remaining partner). Good luck!

[BHoffman]

Hi Dave - thanks for your answer and I see now that the question was so completely basic that it could have been confusing. I blame the heat for that brain fade . Yes of course, the basis of the transferred assets is $100.

[DaveinTexas]

Confusing indeed

I don't know why 1065s and LLC 1065 throw me for a loop, but they do. I've spent hours learning/reading/seeking information and I am still not overly confident with Subchapter K.

No reason to apologize, you might have asked a question someone else was too embarrassed to ask.

Stay cool, it will be 97 today here. Yesterday, the humidity level dropped but it was still 92 degrees; the weatherman nearly called this a slight cold front. Silly!