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"sale or exchange" of a sports franchise or player contracts
within the meaning of section 1056.
In general, the sale of a partnership interest does not
affect the basis of partnership property, and the issue of
whether section 1056 should apply to the sale of a partnership
interest would be irrelevant. A partnership may be able to
increase the basis of certain assets upon a sale of a partnership
interest where the sale causes a constructive termination of the
partnership. See sec. 708(b)(1)(B). Section 708(b)(1)(B)
provides for a partnership's termination on a sale or exchange of
50 percent or more of the total interest in the partnership’s
capital and profits within a 12-month period. The termination
results in a deemed distribution of partnership property to the
new and continuing partners (Bowlen and Adams) and a deemed
recontribution of the property to a newly formed partnership.
Sec. 1.708-1(b)(1)(iv), Income Tax Regs.
Section 1.708-1(b)(1)(iv), Income Tax Regs., states, in
pertinent part:
(iv) If a partnership is terminated by a sale or
exchange of an interest, the following is deemed to
occur: The partnership distributes its properties to
the purchaser and the other remaining partners in
proportion to their respective interests in the
partnership properties; and, immediately thereafter,
the purchaser and the other remaining partners
contribute the properties to a new partnership * * *
For election of basis adjustments by the purchaser and
other remaining partners, see sections 732(d) and
743(b) and paragraph (d) of section 1.732-1 and
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