collapsible partnership

Tax. A partnership formed by partners who intend to dissolve it before they realize any income.

• Any partner’s gain resulting from unrealized receivables or inventory that has increased substantially in value will be treated by the IRS as ordinary income rather than as capital gain. IRC (26 USCA) § 751. Cf. collapsible corporation under CORPORATION. [Cases: Internal Revenue 3931, 3935.]

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