In a recently issued private letter ruling (PLR 201605004), the IRS ruled on the tax
consequences of a limited partnership’s conversion to another
limited partnership entity formed under the same state law. The PLR
concludes that one entity was the continuation of the other, which
was classified as a partnership for U.S. federal income tax
purposes, and that the partnership did not terminate under Section
708.
The transaction described in the PLR involved PRS 1, a state
limited partnership, which, for U.S. federal income tax purposes,
was an entity disregarded from PRS 2, which wholly owned PRS 1
indirectly through disregarded entities. PRS 1 owned an interest in
PRS 3, a state limited partnership. On a subsequent date, PRS 4
acquired an interest in PRS 3, and PRS 3 became a partnership for
U.S. federal income tax purposes. Also on the same date, presumably
following PRS 4’s acquisition of an interest in PRS 3, PRS 4
exchanged its interest in PRS 3 for an interest in
