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Redemptions of Partnership Interests: Sections 736(b) vs. 736(a)

Installment Sales, Hot Assets, OBBBA Modifications to SALT Caps

A live 110-minute CPE webinar with interactive Q&A

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Friday, October 31, 2025

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

Early Registration Discount Deadline, Friday, October 3, 2025

or call 1-800-926-7926
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This webinar will discuss redemptions of partnership interests for tax advisers working with partnerships and LLCs. Our authoritative panel will explain the tax effects of these dispositions on the partner, the remaining partners, and the partnership, including the application of ordinary versus capital gains tax rates, installment sales, and new considerations resulting from recent legislation including the One Big Beautiful Bill Act (OBBBA).

Description

The acquisition of a partner's interest directly by the partnership is a redemption. Although the partner and partnership may be in the same place economically after a redemption or sale of a partner's interest, the tax consequences can be dramatically different. IRC Section 736 governs the treatment of liquidating payments to retiring and deceased partners. Section 736(b) describes the treatment of gains on these payments other than those covered by Section 736(a). Section 736(a) explains the treatment of distributive shares of income and guaranteed payments to exiting partners.

Like sales of partnership interests, if the partnership's assets include hot assets (inventory and untaxed accounts receivable), a portion of the proceeds is treated as ordinary income. For redemptions, however, only "substantially appreciated" inventory is included. As with sales of partnership interests, redeemed partnership interests are eligible for installment sale treatment. Unlike other sales and aside from hot assets, a partner can recover his basis first before recognizing gain on the redemption of his interest.

The BBA centralized partnership audit rules and the OBBBA's changes to the SALT cap have further complicated these tax considerations for tax professionals.

Listen as our panel of partnership experts explains the tax consequences of redeeming a partner's interest in an LLC or partnership.

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Outline

  1. Redeeming partnership interests
  2. IRC Sections 736(b) and 736(a)
  3. Goodwill
  4. Section 754 elections
  5. Impact of recent legislation
    1. Partnership audit rules
    2. OBBBA and state PTE taxation regimes
    3. Other
  6. Installment sales
  7. Section 751 property
  8. Notable cases and rulings

Benefits

The panel will cover these and other critical issues:

  • Tax consequences of redemptions on the exiting partner and the partnership
  • Calculating the tax on the redemption when the partnership holds hot assets
  • Structuring redemptions to withstand IRS challenges
  • Making a Section 754 election when a partner's interest is redeemed
  • The effect of SALT caps and the OBBBA on redemptions

Faculty

Sosa, Nathan
Nathan Sosa, CPA, MST
Senior Advisor
Hall CPA

Mr. Sosa, CPA, MST, is the Manager of the National Tax Department and the Audit Defense Division at Hall CPA. He...  |  Read More

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Early Discount (through 10/03/25)

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