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Other Nontaxable ExchangesNote: The information provided herein has been collected from the IRS Website and is not guaranteed or endorsed by Bob and Linda Lario. For more information, please contact www.irs.gov or a 1031 exchange qualified intermediary. The following discussions describe other exchanges that may not be taxable. Partnership Interests Exchanges of partnership interests do not qualify as nontaxable exchanges of like-kind property. This applies regardless of whether they are general or limited partnership interests or are interests in the same partnership or different partnerships. However, under certain circumstances the exchange may be treated as a tax-free contribution of property to a partnership. See Contribution of Property in Publication 541, Partnerships. Contribution of Property (Publication 541) Usually, neither the partner nor the partnership recognizes a gain or loss when property is contributed to the partnership in exchange for a partnership interest. This applies whether a partnership is being formed or is already operating. The partnership's holding period for the property includes the partner's holding period. The contribution of limited partnership interests in one partnership for limited partnership interests in another partnership qualifies as a tax-free contribution of property to the second partnership if the transaction is made for business purposes. The exchange is not subject to the rules explained later under Disposition of Partner's Interest. An interest in a partnership that has a valid choice in effect under section 761(a) of the Internal Revenue Code to be excluded from all the rules of Subchapter K of the Code is treated as an interest in each of the partnership assets and not as a partnership interest. See Exclusion From Partnership Rules in Publication 541. Exclusion From Partnership Rules (Publication 541) Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. All the partners must agree to make the choice, and the partners must be able to compute their own taxable income without computing the partnership's income. However, the partners are not exempt from the rule that limits a partner's distributive share of partnership loss to the adjusted basis of the partner's partnership interest. Nor are they exempt from the requirement of a business purpose for adopting a tax year for the partnership that differs from its required tax year, discussed under Tax Year, later. Text and information courtesy of the Internal Revenue Service. Contact Bob and Linda Lario today for Colorado Ranch Land, Mountain Homes and Land, and Real Estate Acreage in Western Colorado! |
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