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KC may have been trying to give a link to this IRS audit guide as it contains the text she quoted in the earlier posts: http://www.irs.gov/Businesses/Partnerships/Partnership---Audit-Technique-Guide---Chapter-7---Dispositions-of-Partnership-Interest-(Rev.-3-2008) It does sound like this partner has a deemed distribution because he has been relieved of his share of the partnership debt. Also, you should read the section about assets that have the characteristics of being both cold and hot assets since this building has been depreciated, you should check whether or not there is a component of ordinary income from recapture to this transaction. I was starting to post that you should also check whether you have a technical termination or not so that you don't miss filing a return for a short year, but then I ran across this article that says transfers by gift don't trigger a technical termination with the cite of Regs. Sec. 1.708-1( b )(2). http://www.aicpa.org/Publications/TaxAdviser/2012/October/Pages/clinic-story-10.aspx It's not anything you asked about, but since I had the article up, I thought I'd post it since it does address the gift issue.

Really? My home office is my sole place of employment and is that big. In that space I have a large desk, several chairs that clients sit in, my chair, separate computer hutch, small table with printer, small table for binding machine, several lateral file cabinets, a copier, shredder, a place to temporarily put client files with work in process, and closet all taking up that space. Other than one non-accounting picture on the wall and a dog sleeping on the floor at the moment, it is exclusive use. Not all of us work in a cubicle.

Isn't it nice that only conservative groups are "using statistics to support their cause"?

Forced increases in income simply ratchet all income and expenses upward. Witness increases in minimum wage. Ask anyone that received that increase if they are any more well off than before. The answer is no because all of the increase that the employers had to pay had to be compensated through higher prices. Higher prices and higher taxes ate up all of the increase. IMHO, reducing welfare is the ONLY answer. A recent conversation was witnessed locally where a woman working part time (by choice) at a local grocery store, who receives welfare as does her stay at home husband (by choice) and her adult child living at home (unemployed by choice) and having just got back from a cruise and had just bought a near top of the line refrigerator was heard to say, "you would be surprised at what you can buy when you don't have to spend your money on food". Ya think?