QUESTION
I am a member of a limited partnership and the general partner is selling the apartment project with the approval of the majority of partners. I've
Asked on Sep 01st, 2012 on Business Law - Kansas
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requested that siultaneously at time of sale he allow the entyire partnership assets go throught a 1031 exchange and then the partners wanting out would be paid off also simultaneously allowing me and any other partners to reduce our tax obligation substantially. Does he have a fiduciary responsibility to do so
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It is not possible to consummate a Section 1031 exchange if there is an outright "sale" -- as your inquiry notes -- of the principal asset of the partnership; a tax-free exchange can only be effected if property is exchanged for property of like kind, not for cash. Generally speaking, the general partner of a partnership has a duty to deal fairly with the limited partners and to deal with partnership property in good faith. He need not minimize the tax consequence to a subset of limited partners, even if he could, merely because you request it.
Answered on Sep 02nd, 2012 at 12:52 PM