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RE: Tax Basis in Liquidation of Gen'l Partnership Int.

Archived — Wed, 21 Dec 2005 11:08:15 GMT

MaryKay:

Thanks for your response. I anticipated your answer, but needed your customary expert support on this matter.

Best Wishes for a happy holiday season & healthy new year.

Harvey

RE: Tax Basis in Liquidation of Gen'l Partnership Int.

Archived — Wed, 21 Dec 2005 11:07:56 GMT

This is an interesting question because you're dealing with inside and outside basis.

Did the partnership make a Section 754 election? If so, you get a step-up. I don't think the fact that KY is not a CP state is relevant. You use the federal rules for determining gain on the federal return. Most states follow the federal when it comes to income tax matters.

If the partnership did not make a Section 754 election, then the partnership interest is stepped up and not the underlying real estate. On the federal return a pass-thru gain from the partnership can be offset by the loss (created by step up) from the termination of the partnership. If KY treats the partnership interest as an intangible, I don't see how the step up in basis would give you a deduction on that state's return.

Tax Basis in Liquidation of Gen'l Partnership Int.

Archived — Wed, 21 Dec 2005 11:06:58 GMT

CA decedent's estate included a "stepped-up tax basis" in a und. 1/2 CP int. in a CA gen'l part. in which CA surv. sp's. und. 1/2 CP int. of said part. was also "stepped-up".

CA part. had only one (1) asset - rental real estate in Kentucky which was sold after decendent's
DOD by partnership. The part. termin/liqd thereafter.

Assuming an income tax return filing requirement in Kentucky by the surv. sp. for her 1/2 part. liqd. proceeds, does she get her "stepped-up basis" in the und. 1/2 CP part. int. to offset the liqd. proceeds when Kentucky is not a CP state?