The tax effects are identical whether a partner sells his or her interest to another partner, the partnership, or a person who has not been a partner, assuming the amount of cash to be received is the same.

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The tax effects can differ based on whether a partner sells their interest to another partner, the partnership itself, or an outside party. The nature of the sale can affect the character of the gain or loss recognized (capital vs. ordinary), how payments are taxed, and the treatment of the partner's share of partnership liabilities.

The Tax Effects Are Identical Whether a Partner Sells His