When can partnership interests be exchanged tax-free?Sec. 1031 permits the exchange of "like-kind" property without the recognition of any gain realized on the exchange. However, Sec. 1031(a)(2)(D) specifically states that "interests in a partnership" are not like-kind property Like-Kind Property Investment or business land/properties that are considered to be the same type and exchanging them is therefore tax-free. Notes: For example, you can exchange a car for another car tax-free, but not a car for a piece of land. . However, flush To empty the contents of a memory buffer. See buffer. Flush Elizabeth Barrett Browning’s spaniel, subject of a biography. [Br. Lit.: Woolf Flush in Barnhart, 446] See : Dogs (data) flush language was added to Sec. 1031(a)(2) by the Revenue Reconciliation Act of 1990, providing an exception to this general rule. An interest in a partnership with a valid Sec. 761(a) election may be treated as an interest in each of the assets of such partnership. (Sec. 761(a) permits certain partnerships to be excluded from subchapter K.) Therefore, it is possible for an exchange of a partnership interest to qualify for Sec. 1031(a) nonrecognition treatment. Sec. 761 defines which partnerships qualify for Sec. 760(a) elections. A partnership may make the election to be excluded from all of subchapter K if the partnership is formed -- for investment purposes only and not for the active conduct of a business (e.g., raw land joint venture), -- for the joint production, extraction or use of property, but not for the purpose of selling services or property produced or extracted (e.g., a typical oil and gas joint venture) or, -- by dealers in securities for a short period, for the purpose of underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , selling or distributing a particular issue of securities. However, to qualify, the income of the members of the organization must be determined without the computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. of partnership taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . This election can be made at any time during the life of the partnership. Therefore, there is no need to establish a new partnership; an existing partnership can make this election under Sec. 761(a), and the partners can receive nonrecognition treatment under Sec. 1031(a) for the exchange of their partnership interests. This election is made by attaching a statement to a timely filed return for the year the election is desired. Note: Regs. Sec. 1.761-2(b)(2)(ii) states that if an election was not formerly made, it will be deemed to have been made it it can be shown that the partners intended to have made the election. From Michelle Sanders San´ders n. 1. An old name of sandalwood, now applied only to the red sandalwood. See under Sandalwood. , Houston Houston, city (1990 pop. 1,630,553), seat of Harris co., SE Tex., a deepwater port on the Houston Ship Channel; inc. 1837. Economy The fourth largest city in the nation and the largest in the entire South and Southwest, Houston is a port of entry; , Tex. |
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