Question

The JKL Partnership has three partners with the following interests: Jason 55%, Kathy 25%, and Louis 20%. Will the partnership terminate if Jason sells his entire interest to Maurice? (Assume the year is 2018 .)

A.

No. The Tax Cut and Jobs Act of 2017 repealed the technical termination rule of Sec. 708(b)(1)(B) for partnership tax years beginning after 2017. Therefore, the partnership will not terminate if Jason sells his 55% interest in the partnership.

B.

Yes. If the interest being transferred equals or exceeds 33% of the profits and capital interests, a sale to the remaining partners terminates the partnership.

C.

Yes. If the interest being transferred equals or exceeds 50% of the profits and capital interests, a sale to the remaining partners terminates the partnership.

D.

Yes. If the interest being transferred equals or exceeds 20% of the profits and capital interests, a sale to the remaining partners terminates the partnership.

Answer 1

As per new law, For partnership tax years beginning after Dec. 31, 2017, the Code Sec. 708(b)(1)(B) rule providing for the technical termination of a partnership is repealed.

AS Per new Law, in a partnership Code sec.708(b) as amended by Act sec.13504, it is saying that partnership is not considered as terminated if part of any business, financial operation of the partnership continues to be carried on by any of its partners.

so, in the case of JKL Partnership, the partnership will not terminate if Jason sells his 55% interest in the Partnership. so, the answer is A.

The Tax Cut and Jobs Act of 2017 repealed the technical termination rule of Sec. 708(b)(1(B) for partnership tax years beginning after 2017. Therefore, the partnership will not terminate if Jason sells his 55% interest in the partnership.