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IRS Tax Map 2008
Current IRS Tax Map

taxmap/pubs/p541-001.htm#en_us_publink1000104217

Terminating a Partnership(p3)


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Terminating a Partnership

A partnership terminates when one of the following events takes place.
  1. All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership.
  2. At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner.
Unlike other partnerships, an electing large partnership does not terminate on the sale or exchange of 50% or more of the partnership interests within a 12-month period.
See section 1.708-1(b) of the regulations for more information on the termination of a partnership. For special rules that apply to a merger, consolidation, or division of a partnership, see sections 1.708-1(c) and 1.708-1(d) of the regulations.
taxmap/pubs/p541-001.htm#en_us_publink1000104218

Date of termination.(p3)


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The partnership's tax year ends on the date of termination. For the event described in (1), earlier, the date of termination is the date the partnership completes the winding up of its affairs. For the event described in (2), earlier, the date of termination is the date of the sale or exchange of a partnership interest that, by itself or together with other sales or exchanges in the preceding 12 months, transfers an interest of 50% or more in both capital and profits.
taxmap/pubs/p541-001.htm#en_us_publink1000104219

Short period return.(p3)


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If a partnership is terminated before the end of the tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. The return is due the 15th day of the fourth month following the date of termination. See Partnership Return (Form 1065), later, for information about filing Form 1065.
taxmap/pubs/p541-001.htm#en_us_publink1000104220

Conversion of partnership into limited liability company (LLC).(p3)


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The conversion of a partnership into an LLC classified as a partnership for federal tax purposes does not terminate the partnership. The conversion is not a sale, exchange, or liquidation of any partnership interest; the partnership's tax year does not close; and the LLC can continue to use the partnership's taxpayer identification number.
However, the conversion may change some of the partners' bases in their partnership interests if the partnership has recourse liabilities that become nonrecourse liabilities. Because the partners share recourse and nonrecourse liabilities differently, their bases must be adjusted to reflect the new sharing ratios. If a decrease in a partner's share of liabilities exceeds the partner's basis, he or she must recognize gain on the excess. For more information, see Effect of Partnership Liabilities under Basis of Partner's Interest, later.
The same rules apply if an LLC classified as a partnership is converted into a partnership.
taxmap/pubs/p541-001.htm#en_us_publink1000104221

IRS e-file (Electronic Filing)(p3)


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previous topic occurrence IRS E-file (Electronic Filing) next topic occurrence

taxmap/pubs/p541-001.htm#en_us_publink1000104222
taxmap/pubs/p541-001.htm#TXMP627e7638
e-file Text Descriptione-file  
Certain partnerships with more than 100 partners are required to file Form 1065, Schedules K-1, and related forms and schedules electronically (e-file). Other partnerships generally have the option to file electronically. For details about IRS e-file, see the Form 1065 instructions.