IRS Addresses Tax
Treatment of Conversion of LLC into Limited Partnership
In a private letter ruling
released on November 9, 2017, the IRS addressed the tax consequences of the
conversion under state law of a limited liability company into a limited
partnership. Private Letter Ruling
201745005 (August 4, 2017; released November 9, 2017).
In this instance, a state law
limited liability company taxed as a partnership desired to convert into a
limited partnership. The LLC had as its members another LLC, it being taxed as
a corporation, and an LLC taxed as a disregarded entity. In the course of the
reorganization, those member entities, or their ultimate owners, would become
the partners in the limited partnership.
In reliance upon a Revenue
Ruling 84-52 and Revenue Ruling 95-37, as well as application of Section 708 of
the Internal Revenue Code, the IRS found that this transaction would not result
in the termination of the LLC or any of its members recognizing taxable income.
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