7763 / Is partnership income and loss included in a deceased partner’s final return? In the return of his successor in interest?

The taxable year of a partnership will close with respect to a limited partner whose entire interest in the partnership terminates for any reason, including the death of the limited partner.¹ A decedent’s own tax year also ends on the date of death and is ordinarily a short year.² Thus, since the partnership tax year and the decedent’s tax year will end on the same day, partnership income or loss will be included in the decedent’s final return.

If the successor sells or exchanges its entire interest, or its interest is liquidated, the partnership year will end as to the selling successor at the date of sale. See Q 7753.

1. IRC § 706(c)(2)(A).