ExpertMedium1 markMultiple Choice
CPA · Question 43 · Area 3: Entity Tax Compliance
A partnership has two partners, A (50%) and B (50%). Partner A sells their interest to C. The partnership terminates under Section 708(b)(1)(B) (technical termination) - Note: This rule was repealed by TCJA for tax years beginning after 2017. Assuming the question refers to a 'technical termination' under pre-TCJA or a state that decouples, or simply asks about current law termination: Under CURRENT federal law (post-TCJA), does the sale of 50% interest trigger a technical termination?
A partnership has two partners, A (50%) and B (50%). Partner A sells their interest to C. The partnership terminates under Section 708(b)(1)(B) (technical termination) - Note: This rule was repealed by TCJA for tax years beginning after 2017. Assuming the question refers to a 'technical termination' under pre-TCJA or a state that decouples, or simply asks about current law termination: Under CURRENT federal law (post-TCJA), does the sale of 50% interest trigger a technical termination?
Answer options:
A.
Yes, if sold within 12 months.
B.
No, technical terminations were repealed.
C.
Yes, always.
D.
Only if the partnership elects.
How to approach this question
1. Identify Topic: Partnership Technical Termination.<br/>2. Identify Law Change: TCJA (2017) repealed the rule that terminated a partnership upon sale of 50% or more interest.<br/>3. Current Rule: Partnership continues unless no part of business is carried on or only one partner remains.
Full Answer
B.No, technical terminations were repealed.✓ Correct
For tax years beginning after 2017, the technical termination rule of Section 708(b)(1)(B) is repealed. A partnership does not terminate solely because of the sale or exchange of 50% or more of interests.
Common mistakes
Applying the old 50% rule.
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