Thursday, February 7, 2013
Howard E. Abrams (Emory), Now You See it, Now You Don't: Exiting a Partnership and Making Gain Disappear (2009) at Northwestern today as part of its Advanced Topics in Taxation Colloquium Series hosted by Herbet Beller, Thomas Brennan, David Cameron, Philip Postlewaite, and Robert Wootton:
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.