Whenever a partnership is dissolved under state law, it is terminated for federal tax purposes.

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A partnership's dissolution under state law does not necessarily mean it is terminated for federal tax purposes. For federal tax purposes, a partnership is considered terminated when all its operations are wound up and its affairs are fully concluded, or if there is a sale or exchange of 50% or more of the total interest in partnership capital and profits within a 12-month period.

Whenever a Partnership Is Dissolved Under State Law, It Is