Summary
Modifications to a partnership agreement can allow partners to gift partnership interests retroactively, as long as the modifications are agreed to by all the partners or adopted as otherwise required by the partnership agreement. Modifications may be oral, provided they are made in conformity with the partnership agreement or are otherwise binding among the partners.
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Summary
The gift of a partnership interest generally does not result in the recognition of gain or loss by the donor or the donee. A gift is, however, subject to gift tax unless the gift qualifies for the annual gift tax exclusion or reduces the donor's lifetime gift tax applicable exclusion amount.
Gifts of Partnership Interests - The Tax Adviser
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Summary
How Much Flexibility Is there?: According to Sec. 761(c), a partnership agreement includes any modifications made prior to or at the time prescribed for filing the partnership return for the tax year (not including extensions) that are agreed to by all the partners or adopted as otherwise required by the partnership agreement. Such modifications ordinarily relate back to the begi...
How Formal Does The Modification Need to be?: Modifications for a particular tax year will be given effect if agreed to by all the partners or adopted as otherwise required by the partnership agreement. Modifications may be oral provided they are made in conformity with the partnership agreement or are otherwise binding among the partners. Obviously, relying on oral modifications can be risky....
Conclusion: Timely modifications to a partnership agreement can allow partners to engage in a measure of self-help to change their economic and tax situations. The flexibility is not without limits, but by operating within these limits, tax advisers may be able to address potential problems for their clients that might be unsolvable if limited by the terms of ...
Flexibility in Retroactive Partnership Agreement Amendments
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