IRS Allows Continuation Of Partnership

The IRS has confirmed in emailed advice (CCA 201315026) that a partnership whose partners continued the old partnership's business through a new entity under local law continued as the same partnership for U.S. federal income tax purposes.

Section 708(a) provides that a partnership is considered continuing if it is not terminated. A partnership can terminate for U.S. federal income tax purposes in two ways. Under Section 708(b)(1)(A), a partnership terminates if no part of any business, financial operation or venture of the partnership continues to be carried on by any of its partners in the partnership. Under Section 708(b)(1)(B), a partnership terminates if within a 12-month period 50% or more of the total interest in partnership capital and profits is sold or exchanged.