Preserving a partnership when the general partner files for bankruptcy

Article Abstract:

A partnership must provide for circumstances in which a general partner files a petition for bankruptcy. The bankruptcy of a general partner may result in a change in a control of the partnership that is not in the best interest of the limited partners. While there is no way to completely insulate a partnership from the adverse effects of a general partner's bankruptcy, steps can be taken to limit the negative consequences of such an occurrence. The duties and responsibilities of general and limited partners should be specified so that performance on both side remains owing and due for both parties. The performance activities of limited partners may include the payment of money or regular reviews and approval of actions of the partnership. Practitioners should structure the partnership agreement by specifying the duties, rights, and liabilities of all parties if a bankruptcy occurs.

Methods, Analysis, Tax accounting, Partnership, Partnerships, Bankruptcy

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Duty of consistency binds taxpayers to improper election

Article Abstract:

The court ruled in 'LeFever' that the heirs of an estate that filed a special-use valuation election were liable for taxes when the IRS found that the election was improperly conducted. One of the conditions that have to be met before such an election can be made is that the heirs continue to put the property to a qualifying use for a full decade. If they fail to satisfy this requirement, the IRS will assess the amount of uncollected tax because of the election within three years after learning that the property has been disposed of or place to a nonqualifying use. In the 'LeFever' case, the IRS found that the heirs cash rented the property to non-family members, which is considered to be nonqualifying use. The lapse of the three-year assessment period was found to be irrelevant to the case because of a duty of consistency.

Cases, Estate tax, Estate taxes, Election (Wills), Special use valuation (Taxation)

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