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Short Year 1065 Returns for Terminated Partnerships: Avoiding Penalties For Failure to Report

IRC 708(b) Filing Requirements and Reporting Prior and Successor 754 Elections

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, November 8, 2017

Recorded event now available

or call 1-800-926-7926

This course will provide tax advisers with a practical guide to completing “short year” Form 1065 Partnership Income Tax returns. The panel will discuss the rules governing short-year filings and will focus on technical terminations of existing partnerships that continue business activities as legal ongoing entities.


The Section 708(b) “technical termination” is a peculiarity of partnership tax law that leads to unexpected tax penalties. The sale of greater than 50% of the partnership’s assets or profits within a 12-month period, among other circumstances, can terminate the partnership for tax purposes though the entity is actively conducting business.

When a technical termination occurs, the partnership is deemed to have closed its tax books. The Code considers the partnership’s assets to be contributed on a tax-free basis to a successor partnership or LLC and deems ownership interests in the successor partnership distributed to the remaining members of the terminated partnership.

A partnership subject to a technical termination must file two “short-year” Form 1065 income tax returns: One for the period up to the termination event and a second for the successor partnership after the termination. Failure to comply leads to penalties for failure to timely file the initial short-year return and for issuing inaccurate K-1s to the partners.

Tax advisers must know when a technical termination occurs, make sure capital accounts are accurately carried over to the successor partnership, and review the status of existing elections to accurately file the short-year returns.

Listen as our experienced panel provides a practical guide to preparing “short-year” partnership income tax returns for terminated partnerships.



  1. Identifying technical terminations under Section 708(b)
  2. Recording deemed transfer of assets and partnership interests
  3. Applying elections from terminated partnership to successor partnership
  4. Completing short-form 1065 returns
  5. Penalties for noncompliance


The panel will discuss these and other important issues:

  • What constitutes a “sale or exchange of greater than 50% interest in capital or profits” within a 12-month period that causes a technical termination?
  • How do multiple sales or dispositions impact the Section 708(b) analysis?
  • How must advisers handle and report prior 754 elections made by the partnership?
  • What opportunities for new elections are presented in technical termination/short-year scenarios?


Lovett, Brian
Brian T. Lovett, CPA, JD

Withum Smith+Brown

Mr. Lovett has extensive experience serving the tax needs of both public companies and closely-held businesses,...  |  Read More

Bartolf, Scott
Scott Bartolf, CPA

Senior Tax Manager
Withum Smith+Brown

Mr. Bartolf specializes in individual, partnership, corporate, estate & trust taxation and, state tax audits. He...  |  Read More

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