RULPARevised Uniform Limited Partnership Act
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Until Georgia revised its version of the Uniform Limited Partnership Act in 1988, section 7 of the 1916 Act imposed personal liability on a limited partner if he "takes part in the control of the business." The 1976 revision had softened the rule, but had not completely eliminated the risk if the limited partner "participates in the control of the business." (158) The Georgia revision of RULPA [section]303 provided that "a limited partner does not become liable [for the obligations of the limited partnership] by participating in the management or control of the business." Ultimately the 2001 version of RULPA followed Georgia's lead.
The authors are not aware of any situations in which the IRS has challenged the status of a limited partner in a limited partnership as such by reference to state law or RULPA. However, the IRS has successfully challenged the treatment of partners in a limited liability partnership (LLP).
Parmer A does not violate RULPA rules and receives an income allocation of short-term capital gain, instead of an ordinary trade or business distributive share allocation, for the tax year ending Dec.
Moreover, corporate-style limited liability uses a very different mechanism than, say, limited partnerships under RULPA 1976/1985.
The Prefatory Comments to ULPA (2001) state, "Due to estate planning concerns, several states have amended RULPA to prohibit limited partner withdrawal unless otherwise provided in the partnership agreement." Prefatory Comments to UNIF.
(108) The 1976 RULPA introduced a new control rule that was somewhat more lenient than the original formulation, but still broad enough to discourage most investors from participating in the firm's business.
The exclusion could be jeopardized if state law or agreements do not serve to restrict the interests beyond those of the RULPA and the synonymous corporate rules.
While the restrictions in the limited partnership agreement in TAM 9751003 may upset the ability to claim an annual exclusion, limited partnership interest gifts under most agreements, where the assignee has the general rights provided by Article 7 of RULPA, should meet the Regulations section 25.2503-3(b) present interest test.
The UPA, RULPA, and RUPA each seem to reflect a notion that an assignee's vulnerability ought not extend beyond the partnership term in effect when the assignment took place:
These and certain other states have enacted the Revised Uniform Limited Partnership Act (RULPA) with modifications that prohibit limited partners from withdrawing from an FLP and receiving a distribution unless the partnership agreement provides otherwise.
In a similar vein, the certification of interests, in limited partnerships, whether as a general or as a limited partner, is not addressed in the Uniform Limited Partnership Act (1916) (ULPA), the Revised Uniform Limited Partnership Act (RULPA), or the Uniform Limited Partnership Act (2001) (ULPA).
Although the Revised Uniform Limited Partnership Act (RULPA) provides that a creditor can obtain a court order charging a limited partner's interest for unsatisfied claims, such a creditor can obtain only the rights of an assignee.(2) The assignee will be subject to tax on the partner's allocable share of partnership income, even if no partnership distributions are made.(3)