Proposed regs. issued on amortization of startup expenses by terminating partnerships.

• Author: Schreiber, Sally P.

The IRS issued proposed regulations aimed at preventing partnerships from using technical terminations to accelerate their deductions of startup and organizational expenses (REG-126285-12). When finalized, the regulations will apply to technical terminations of partnerships that occur on or after Dec. 9, 2013.

Under Sec. 708(b)(1), a partnership terminates if (1) no part of any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership, or (2) within a 12-month period there is a sale or exchange of 50% or more of the total interest in partnership capital and profits. The second form of termination is often called a technical termination.

Under Sec. 195(b)(1)(B), startup expenditures that are not fully deductible under Sec. 195(b)(1)(A) must be amortized over a 180-month period (15 years). Sec. 195(b) (2) allows taxpayers that completely dispose of a business before the end of the 15-year period to deduct the remaining expenses to...