Tax Planning For Partnership Distributions to Maximize the Section 121 Exclusion

摘要

The Section 121 exclusion for the sale of a principal residence has been in existence since 1997. This article will demonstrate that using the partnership distribution rules can allow a taxpayer to defer not only gain on receiving a distribution of property as opposed to cash, but also to ultimately avoid any gain recognition when that property is eventually sold by the distributee. The following example illustrates how the partnership distribution rules can be combined with the personal residence exclusion to avoid or minimize tax consequences.