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Current Year Tax Map
Publication 541
taxmap/pubs/p541-002.htm#en_us_publink1000104223

Exclusion From Partnership Rules(p4)

rule
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.
taxmap/pubs/p541-002.htm#en_us_publink1000104224

Investing partnership.(p4)

rule
An investing partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property meet all the following requirements.
taxmap/pubs/p541-002.htm#en_us_publink1000104225

Operating agreement partnership.(p4)

rule
An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property meet all the following requirements. However, this exclusion does not apply to an unincorporated organization one of whose principal purposes is cycling, manufacturing, or processing for persons who are not members of the organization.
taxmap/pubs/p541-002.htm#en_us_publink1000104226

Electing the exclusion.(p4)

rule
An eligible organization that wishes to be excluded from the partnership rules must make the election not later than the time for filing the partnership return for the first tax year for which exclusion is desired. This filing date includes any extension of time. See section 1.761-2(b) of the regulations for the procedures to follow.