Taxes: Partnership Sales & Terminations

Question 1

Taxes:
Partnership Sales & Terminations
Sale of Partnership Interest

Answer 1

Sale of Partnership Interest

• sale results in gain/loss using outside basis
• any portion of gain/loss due to hot assets is not eligible for capital gain treatment

Question 2

Taxes:
Partnership Sales & Terminations
Hot Assets

Answer 2

Hot Assets

• inventory or unrealized AR
• selling partner must allocate portion of proceeds to these and report as ordinary income
• remainder allocated to partner’s capital asset interest and result in capital gain/loss