Technical termination of partnership

[Linda Mathey]

I have an LLC with five equal members that has operated as a partnership since inception in 2005. Their only asset was a warehouse that they purchased for $410,000 which carried a mortgage for $410,000. The mortgage as of 11/13/09 was down to $305,000. The five partners each sold their 20% interest on 11/13/09 to another LLC which is owned by the same five partners for $100 each.

I know this creates a technical termination of the original partnership but I am stumped as to how to report the ending balances on Sch L. Do I just enter all activity thru 11/13 and file Sch L showing the ending balances on that date?

I assume the LLC that purchased them will show the activity from 11/14/09 thru 12/31/09?

The partners are unhappy because they thought they would get a loss. I explained that it was a related party sale and therefore no loss was available to them.

Any help would be appreciated.

[TAXBILLY]

Bumping this up. I haven't done a a partnership in years but many on this board do and can probably give good advice.

taxbilly

[Linda Mathey]

Bumping this up. I haven't done a a partnership in years but many on this board do and can probably give good advice.

taxbilly

Thanks Taxbilly I appreciate any help. From what I have read, it causes a technical termination and a short period return. I am assuming because a new partnership is presumed to be established that will use the old kship ID number they will file a short period return and their opening balance sheet will be the old kship's closing one.

Just have not had this situation before.

[OldJack]

This sale is a sham transaction with no economic substance. The property should be shown on the final partnership tax return as a distribution of property (to partners) at cost basis with no gain or loss. The new partnership picks up the property (from partners) at the same basis as in the old partnership. Your clients are idiots.