Magazine article The CPA Journal

Conversion from a General to a Limited Partnership

Magazine article The CPA Journal

Conversion from a General to a Limited Partnership

Article excerpt

In PLR 9250031, the IRS considered the case of a general partnership that wished to become a limited partnership and to place management responsibility in the hands of two of the partners. The partnership owned and managed real estate, some of which secured non-recourse debt. The general partnership was owned by three equal partners. After the conversion, one partner would own a one-third limited partnership interest, another would own a one-sixth general partnership interest and a one-sixth limited partnership interest, and the third partner would own a one-sixth general partnership interest and transfer a one-sixth limited partnership interest to his spouse.

The IRS applied Rev. Rul. 84-52 and held that the conversion will not result in recognition of gain or loss under Sections 741 or 1001 by either the partnership or by any partner. Further, the limited partnership would be viewed as a continuation of the general partnership, and there would be no termination of the partnership under Sec. …

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