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When a partnership interest is sold during the partnership's taxable year, how is the income allocated...

When a partnership interest is sold during the partnership's taxable year, how is the income allocated between the buying partner and selling partner? When is the income reported?

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Answer #1

When a partnership interest is sold, the selling partner's taxable year ends with respect to the selling partner. Income from the partnership is allocated between the buying partner and the selling partner prorated on the basis intervals of time that each one of them owns the partnership interest in the given year.

The selling partner must claim the income for the year in which the sale closes rather than at the end of the partnership year, which is generally the case.

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