The sale of a partnership interest generally results in a capital gain or loss for the selling partner. However, if the partnership holds inventory items or unrealized receivables (which includes depreciable property) at the time of the sale or exchange, a portion of the gain or loss will be ordinary gain or loss. The concept of the aggregate theory and Section 751 “hot assets” will be discussed along with the proper valuation methods to employ when performing the “hypothetical sale” computation required as part of every sale of a partnership interest.

Key talking points:

• Most partnerships have Section 751 assets and therefore are required to conduct a hypothetical sale of partnership assets when one or more partners sell their partnership interest.  The most common Section 751 assets are depreciable and amortizable assets


• In conducting the hypothetical sale analysis, the partnership must assign a reasonable fair market value to each asset, using a going concern valuation methodology


• Even though the taxpayer has an appraisal, or there is an agreement between two unrelated third parties,  it does not mean the service will accept the FMV allocations for the assets. The agreement must reflect reasonable valuations for partnership assets

• Identify the tax law relating to the sale of partnership interest tax issues


• Recognize how to gain insight into common issues encountered during the sale of partnership interest campaign


• Identify the service’s position with respect to the common sale of partnership interest tax issues.

NASBA Approved

CPAacademy.org (Sponsor Id#: 111889) is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.

CPAacademy.org 1685 S. Colorado Blvd, Suite #205, Denver, CO 80222

EA Approved

CPAacademy.org (Sponsor Id#: HURS9) has entered into an agreement with the Internal Revenue Service, to meet the requirements of 31 Code of Federal Regulations, section 10.6(g), covering maintenance of attendance records, retention of program outlines, qualifications of instructors, and length of class hours. This agreement does not constitute an endorsement by the IRS as to the quality of the program or its contribution to the professional competence of the enrolled individual. Credit earned by attendees with a PTIN will be reported directly to the IRS as required of all providers. To ensure your CPE hours are reported, update your profile in My Account to include your PTIN number. Please note: IRS CE is only mandatory for EAs and ERPAs. For all other tax return preparers, CE is voluntary.

CPAacademy.org 1685 S. Colorado Blvd, Suite #205, Denver, CO 80222