Partnership's formless conversion.

• Author: Laffie, Lesli S.
• Position: From The IRS

Rev. Rul. 2(]04-59 explains the tax treatment when an unincorporated state law entity classified as a partnership for Federal tax purposes converts to a state law corporation under a state statute that does not require an actual transfer of the unincorporated entity's assets or interests (a state formless conversion statute).

Facts: On Jan. 1, 2003, A is organized in a state as an unincorporated entity classified as a partnership for Federal tax purposes. A elects to convert under a state formless conversion statute into a state law corporation, effective Jan. 1, 2004; as a result, A is classified as a corporation for Federal tax purposes.

Background: The term "corporation" includes (1) an association under Sec. 7701(a)(3), and (2) a business entity organized under a Federal or state statute if the statute describes or refers to the entity as incorporated or as a corporation, body corporate or body politic. If an eligible entity classified as a partnership elects under Regs. Sec. 301.7701-3(c)(1)(i) to be classified as an association, the following is deemed to occur: the partnership contributes all its assets and liabilities to the association in exchange for association stock and, immediately thereafter, the partnership liquidates...