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Thursday, April 30, 2009

Abrams: Exiting a Partnership and Making Gain Disappear

Howard E. Abrams (Emory) has posted Now You See it, Now You Don't: Exiting a Partnership and Making Gain Disappear on SSRN.  Here is the abstract:

In this Article, three methods of exiting are partnership are examined. Each exit strategy offers significant tax advantages to the nonexiting partners. In two of the exit strategies, well-known defects in Subchapter K are exploited, and I conclude that the strategies cannot be attacked successfully by the government using either the detailed rules of Subchapter K or by resort to the partnership anti-abuse rules. However, the third of the exit strategies seeks to exploit language in a treasury regulation in a manner plainly not contemplated by the drafters and which yields a result inconsistent with the structure of subchapter K. I conclude that this exit strategy can be attacked successfully by the government. The two successful strategies show that in many cases the exit of a partner can be used to defer significant amounts of income.

http://taxprof.typepad.com/taxprof_blog/2009/04/abrams-.html

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