![]() ![]() Section 741 closes with…"except as otherwise provided in Section 751.”Īh, there it is. As is often the case with the Code, however, you can’t stop just because you’ve learned some good news you have to keep reading. Section 741 provides that when a partner sells his interest in the partnership, gain or loss is recognized, and such gain or loss is considered gain or loss from the sale or exchange of a capital asset… Why? Because of a little something called “hot assets,” which aside from being my preferred title for a tax-themed porno flick, is also a major trap for the unwary. He now must pay ordinary income rates as high as 43.4% - rather than the preferential rates afforded long-term capital gains - on the majority of his gain from the sale of his partnership interest. is a partnership, A’s tax consequences change dramatically. In this instance, A recognizes $130 of ordinary income and $60 of capital gain on the sale of his interest. The entire gain is taxed as long-term capital gain, and is subject to preferential rates topping out at 23.8%. In this instance, A recognizes $190 of gain on the sale of his interest. In this instance, A recognizes $190 of gain ($220 - $30) on the sale of his interest. ![]()
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