Exchanging Fractional Interests in Property

Abstract

<p>For years, since 1984,<strong>¹</strong>interests in a partnership have been considered ineligible for like-kind exchange treatment.<strong>²</strong>A partnership can, of course, exchange assets with another individual or entity but <em>partnership interests are not like-kind.</em><strong>³</strong>In 1997, the Internal Revenue Service ruled that, in some circumstances, fractional interests in otherwise eligible property may be deemed a partnership with the result that the exchange is not like-kind.<strong>⁴</strong>That development produced an outcry from taxpayers and tax practitioners with IRS agreeing to study whether undivided fractional interests should be considered eligible for like-kind exchange treatment.<strong>⁵</strong></p>