Legal Question in Tax Law in New York

Re: Limited Partnership Tax Shelter Sale

I am stumped also, as your question is unclear. Are you considering purchasing this interest, or checking on the tax consequences of the sale by your friend? If you are considering purchasing the interest, it must be evaluated as would any investment, for its value and benefits. Your friend, if that is the concern, has a deferred tax liability, represented by the negative basis, which would be considered income. In the usual instance of these types of investments, your friend received tax benefits, by having write-offs that could be used to offset other income. Thus, he saved on his income taxes over the years. Now comes the day of reckoning. On the sale, he will have to recognize his negative basis as income. It is possible that the recognition will be taxed as long-term capital gains, so the tax impact will be at that rate, normally 15%. His real benefit is that the writeoffs were trated as ordinary income (losses) so he benefits to the extent, if any, of the tax rate differentials between ordinary income rates and capital gains rates. If this is still a viable entity, your acquisition of his interest may produce similar benefits for you. All of this should be reviewed with a competent accountant. This is a response to an Internet question and the reply is not intended to be legal advice or asd creating an attorney-client relationship. Missing or omitted facts may result in a different reply.