Partner A, an existing partner in Partnership X, acquired an additional partnership interest from Partner B.
The partnership has an IRC Section 754 election in place, and Partner A’s IRC Section 754 basis adjustment was attributable solely to goodwill.
Partner A has now fully amortized the goodwill over the last 15 years.
When Partner A goes to sell a portion of his partnership interest to incoming Partner C, does Partner A have ordinary income recapture under IRC Section 751 on the Section 754 adjustment that was fully amortized to the extent of the % being sold?
Or are IRC Section 754 adjustments treated as retained (and thus not subject to recapture) until all of a partner’s interest is transferred?