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in that it relates to information underlying the determination of
each HCMP partner’s share of liabilities and distributions.
The linchpin of the four items is the parties’ dispute as to
whether HCMP terminated in 1998 for Federal tax purposes.
Section 708(a) provides that a partnership continues to exist
until terminated. Section 708(b) provides that a termination
requires the happening of one of two events. First, under
section 708(b)(1)(A), a partnership terminates when “no part of
any business, financial operation, or venture of the partnership
continues to be carried on by any of its partners in a
partnership”. Second, under section 708(b)(1)(B), a partnership
terminates when “within a 12-month period there is a sale or
exchange of 50 percent or more of the total interest in
partnership capital and profits.”
The parties focus on the first of these events. So do we.7
While the dissolution of a partnership is governed by State law,
the termination of a partnership for Federal tax purposes is
controlled by Federal law. A termination of a partnership for
Federal tax purposes may be different from its termination,
7 As to the second event, the liquidation of a partnership
interest, as reportedly occurred here, is not a “sale or
exchange” for purposes of sec. 708(b)(1)(B). Sec. 1.708-1(b)(2),
Income Tax Regs. (Sec. 1.708-1, Income Tax Regs., was amended on
Jan. 3, 2001. T.D. 8925, 2001-1 C.B. 496, 505. That amendment,
in relevant part, removed old par. (b)(2) and redesignated old
par. (b)(1). Id., 2001-1 C.B. at 500. This part of the
amendment applies to this case in that it is effective Jan. 4,
2001. Id., 2001-1 C.B. at 496.)
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