Subsidiary Partnership Status Sample Clauses

Subsidiary Partnership Status. Since January 1, 2006, have the Subsidiary Partnerships been treated as partnerships and not as associations taxable as corporations for federal income tax purposes, and will their proposed method of organization and operation allow them to continue to be treated as partnerships and not as associations taxable as corporations for federal income tax purposes?

Subsidiary Partnership Status. The Subsidiary Partnerships have from January 1, 2006 through December 31, 2013 been treated as partnerships and not as associations taxable as corporations for federal income tax purposes, and their proposed method of organization and operation will continue to allow them to be treated as partnerships and not as associations taxable as corporations for federal income tax purposes for their taxable years ending December 31, 2014, and thereafter. The Subsidiary Partnerships’ treatment as partnerships for federal income tax purposes depends upon their form of organization and method of operation. Accordingly, no assurance can be given that the future organization and operations of the Subsidiary Partnerships will allow them to continue to be treated as partnerships for federal income tax purposes.

Subsidiary Partnership Status. Effective as of January 1, 1997, the IRS adopted a classification system that permits a closely held unincorporated business to elect its tax status (the “Check-the-Box Rules”). An unincorporated domestic business entity (an “Eligible Entity” as defined in Treasury Regulation §301-7701-3(a) (as effective January 1, 1997)) with at least two members, formed on or after January 1, 1997, will generally be classified as a partnership for federal tax purposes unless it elects to be treated as an association taxable as a corporation.11 Under the Check-the-Box Rules, an Eligible Entity in existence prior to January 1, 1997, will have the same classification that the entity claimed under Treasury Regulations §§301.7701-1 through 301.7701-3 (as in effect prior to January 1, 1997).12 In the case of a business entity that was in existence prior to January 1, 1997, the entity’s claimed classification will be respected for all periods prior to January 1, 1997, if (i) it had a reasonable basis (within the meaning of IRC §6662) for its claimed classification for federal income tax purposes, (ii) the entity, and all members of the entity recognized the federal income tax consequences of any change in its classification within the sixty months prior to January 1, 1997, and (iii) neither the entity nor any of its partners was notified in writing on or before May 8, 1996, that its classification was under examination.13 A partnership can nonetheless be taxed as a corporation if it is a publicly traded partnership under IRC §7704. In addition, the IRS has adopted final regulations that provide an anti-abuse rule (“Anti-abuse Rule”) under the partnership provisions of the IRC (“Partnership Provisions”). Under the Anti-abuse Rule, if a partnership is formed or availed of in connection with a transaction with a principal purpose of substantially reducing the present value of the partners’ aggregate federal tax liability in a manner that is inconsistent with the intent of the Partnership Provisions, the IRS can disregard the form of the transaction and recast it for federal income tax purposes. The Anti-abuse Rule states that the intent of the Partnership Provisions is to permit taxpayers to conduct business for joint economic profit through a flexible arrangement that accurately reflects the partners’ economic agreement without incurring an entity level tax. The regulations go on to provide that the Partnership Provisions are not intended to permit taxpayers (i) to structure tran...

Subsidiary Partnership Status. In order to qualify as a partnership for federal income tax purposes, Treasury Regulations §§301.7701-2 and 301.7701-3 (as effective for periods prior to January 1, 1997) stipulated that an unincorporated organization will be treated as a partnership if it has no more than two of the following corporate characteristics: (1) limited liability; (2) continuity of life; (3) free transferability of interests; and (4) centralized management. An organization will be deemed to possess the corporate characteristic of limited liability if under local law there is no member who is personally liable for debts or claims against the organization. In the case of a limited partnership, personal liability will not exist unless the general partner has substantial assets (other than its interest in the partnership), which could be reached by a creditor of the organization. Personal liability will also not exist when the general partner is merely a “dummy” acting as an agent of the limited partners.11 An organization formed under a statute which essentially conforms to the Uniform Limited Partnership Act will not have continuity of life. In addition, if the death, insanity, bankruptcy, retirement, resignation 11 Treas. Reg. §301.7701-2(d) (as effective prior to January 1, 1997). Cousins Properties Incorporated Xxxxxxx Xxxxx & Co. Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated Xxxxxx Xxxxxxx & Co. Incorporated X.X. Xxxxxx Securities Inc. September [___], 2009 Page 18 or expulsion of any member will cause a dissolution of the organization unless other remaining general partners agree to continue the partnership or at least a majority in interest of the remaining partners agree to continue the partnership, continuity of life does not exist.12 An organization whose members have the power, without the consent of other members, to substitute for himself in the same organization a person who is not a member of the organization has free transferability of interests. This power of substitution does not exist unless the member is able, without the consent of other members, to confer upon his substitute all the attributes of his interests in the organization. The characteristic of free transferability does not exist in a case in which each member can, without the consent of other members, assign only his right to share in profits, but cannot so assign his rights to participate in the management of the corporation.13 The IRS has also stated that it would issue an advance ruling that ...