Partnership terminated; New partnership started

[DBuck]

I have a two person partnership. One of the partners has bought out the other. The partnership will be terminated. The partner that bought out the other, started a new partnership. My question is on the set up of the new partnership. The primary asset is an apartment complex. Old partnership was 50/50. Is the basis of the property in the new partnership 50% of old basis + the buyout paid? Or does the surviving partner sell the asset to the new partnership at current fmv, recognizing capital gains? Does section 721, 743 or 754 apply to this type of situation? Help!!!!

[kathyc2]

Is the transfer of the building something that happened in 2020, or something that is going to happen?

[Lee Welter]

This is a complex issue. At least for me. Your client terminated the Partnership and transferred the asset to a new Partnership. The disposal and transfer should be tax-free to surviving partner. I'm not sure this is a 743 issue since he started a new PShip - he did not adjusted the old partnership. What were the terms of the buy out and termination? Find a business specialist to discuss the details.

[DBuck]

kathyc2, this happended in February 2020

[Lion]

You do need someone experienced with such partnership dispositions. Depending on the timing, but it sounds like the partnership ended at the same time the building was distributed to your client. That asset would be distributed at FMV from the partnership which will show profit that it passes through to your client (or to both partners, if the asset was distributed while there were still two partners). Then your client contributed the asset to the new partnership.

You really have multiple transactions, so take them one at a time. Distribution of building from partnership; profit on partnership books. Your client buying out his partner's interest in partnership; just a buy for your client but a sale for his partner. Contribution of asset to new partnership; probably a tax free contribution. But, read the buy/sell agreement between the two partners and the new partnership agreement and ask a lot of questions. And, look for a mentor.