Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 54-26

1954-1 C.B. 153

Sec. 723

Sec. 1014

Sec. 6031

IRS Headnote

Application of Rev. Rul. 144, C.B. 1953-2, 212, relating to the effect on a partnership, for Federal income tax purposes, of the death, withdrawal, substitution, or addition of a partner.

Full Text

Rev. Rul. 54-26

Rev. Rul. 144, C.B. 1953-2, 212, revoked O.D. 228, C.B. 1, 190 (1919) and holds that a change in the membership of a partnership resulting from the death, withdrawal, substitution, or addition of a parner, or a shift of interest among existing partners does not, in itself, effect a termination of a partnership for Federal income tax purposes. Rev. Rul. 144 also holds that a partnership's basis in its assets is distinct from the partners' bases in their partnership interest, and is not affected by changes in such partnership interests. However, the bases of the interests of the partners may be affected by any change in membership.

In view of the fact that Revenue Ruling 144 was not published until August 3, 1953, the Internal Revenue Service, under the authority of section 3791(b) of the Internal Revenue Code, will not require the provisions of that Revenue Ruling to be applied with respect to those changes in partnership interests which occurred prior to January 1, 1954.