Partial interest is transferred to son who takes on half partnership liability. What is consequences to the partner who lowers his interest to 5%. This is a family owned general partnership. The son takes 750000 liability in partnership and the doner partner liability is reduced by half to 750000.
I'm sorry. This was not actually a gift. The son assumed responsability for half of the debt. The whole debt was 720000. The son committed to pay half of the debt for partnership interest in the partnership. The Fathers percent dropped to 5% with the son owning 95%. I know nothing changes for the partnership. But is this going to constitute a taxable transaction for the individual partner dropping his partnership interest. No money or property changed hands. When the Father inherited the partnership the FMV of that part of the estate was over a million dollars. Your help is very much appreciated.
So son is purchasing a partnership interest by assuming $360,000 debt. Is this equal to the FMV of the partnership interest? Or below?
Father's share of liabilities is reduced by $360,000. This is a deemed distribution to father . It's taxable to father to extent it exceeds father's basis in the partnership immediately before the transaction. Father's basis is not its value on the day he inherited it. It's just the starting point for the calculation.
Are there legal documents for all of this?
"The Fathers percent dropped to 5% with the son owning 95%" So how was this a partnership before this if father owned 100%?
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