Tax Facts

7754 / What amount does a limited partner realize on sale of a partnership interest?

In addition to any money and the value of property received, a limited partner is considered to have received an amount equal to the limited partner’s share (see Q 7738) of any partnership liabilities, both recourse and nonrecourse, of which he or she has been relieved.1 This includes the limited partner’s share of the nonrecourse debt even if it exceeds the value of the property securing the debt.2


If the sale or exchange of an interest in an upper-tier partnership results in a termination of the upper-tier partnership, the upper-tier partnership is treated as exchanging its entire interest in the lower-tier partnership (with additional amounts realized with respect to the lower-tier partnership).3





1.  IRC § 752(d); Treas. Reg. § 1.752-1(c). See Crane v. Comm., 331 U.S. 1 (1947).

2.  Comm. v. Tufts, 461 U.S. 300, 103 S. Ct. 1826, 75 L. Ed. 2d 863, 83-1 USTC ¶ 9328 (1983).

3.  Treas. Reg. § 1.708-1(b)(2).


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