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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10159
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Are there any tax consequences of transferring appreciated property and all other assets

Customer Question

are there any tax consequences of transferring appreciated property
and all other assets and liabilities from one partnership in NJ to another in FL - both partnerships have the same exact ownership by two partners?
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
Please indicate code sections if applicable.
Expert:  Lane replied 1 year ago.
No,YOU are simply contributing your property and it's basis to a new partnership. As long as this is not done as a sales transaction, or done in a way that where ownership interests change you are fine here..Contributions of property, even appreciated property, to a partnership are generally tax-free to the contributing partner.( IRC §721(a)).The contributing partner receives a credit to his or her capital account for the contribution in the amount of the current value of the property. .Now, a contribution to any partnership of property subject to debt may result in an immediate taxable gain to the contributing partner IF (under the rules of partnership taxation regarding liabilities), the contributing partner is deemed to have been relieved of an amount of liabilities in excess of his or her basis in the contributed property. (IRC §§752 and 731)..Now - on the distribution side - we have liquidation vs non-liquidation...A distribution of property, (other than cash or marketable securities treated like cash), is generally tax-free to the partner receiving the distribution. (§731) ...For a nonliquidating distribution, the partner receiving the distributed property takes a basis in the property equal to the partnership’s basis in the property (subject to a cap in the amount of the partner’s basis in his or her partnership interest reduced by any money distributed). (§732(a)).For liquidating distributions of property (other than money) the rule is different. The partner receiving the property distributed in liquidation of his partnership interest takes a basis in the property equal to his or her interest in his or her partnership interest reduced by any money distributed. §732(b).This is a major difference between partnerships and S corpsThe only place you need to worry with partnership is under Section 751(b), which is is based on an aggregate theory that each partner has an undivided interest in the value of all Section 751 property and in the value of all other property.(§ 1.751-1(b)(1)(iii))A distribution must change the proportionate interest of the distributee partner in the value of Sec­tion 751(b) property in order to cause sale or exchange treatment..So, based on the way you've described this, this is not a taxable event at all. Lane
Expert:  Lane replied 1 year ago.
Hi,
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Lane

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