B7.409 Specific computational rules—distributions in specie and partnership annuities
In addition to the general computational rules discussed at B7.406, B7.408, specific rules apply in relation to partnership assets distributed in specie and also the payment of annuities to outgoing partners, as discussed below.
Distributions of partnership assets in specie
A partnership may decide that a particular asset is no longer needed for the partnership business, but, instead of selling it, agree to distribute it in specie to one or more of the partners.
If the distribution is made to all the partners in accordance with their sharing ratio, there is no disposal by any of them and each partner will have the same base cost as before the distribution.
However, if the asset is not distributed to all the partners, or not in accordance with the normal sharing ratio, special rules apply. In such a case, either the partners who do not receive a share in the asset (or receive a share less than their normal entitlement) will receive other value or the partners who receive the asset (or a share in excess of their normal entitlement) will be charged with the value taken. HMRC practice is as follows1:
• the gain or loss which would arise to each partner (including
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