Partners selling interests in partnerships with “hot assets”—including certain non-cancellable service contracts—may recognize ordinary income.
The IRS recently argued in a court case that gain from the sale of a management company was predominately ordinary income because the majority of the company’s value related to service contracts.
Read a November 2019 report [PDF 128 KB]: What’s News in Tax: Customer Value May Result in Ordinary Income from the Sale of Partnership Interests
This report explains the potential significance of the IRS challenge and the importance of identifying customer value in connection with the sale of partnership interests.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.