HG 4 Disposal upon final dissolution
When this section applies


This section applies when a partnership is finally dissolved by agreement of the partners, court order, or otherwise, and the partnership’s business ignoring section HG 2 will not continue to be carried on in partnership.

Disposal and re-acquisition


A partner of the partnership is treated as disposing of all of their partner’s interests in the partnership, immediately before the dissolution, to a single third party for a payment equal to the interests’ market value. The partner is treated as re-acquiring all of their partner’s interests immediately after the dissolution, from the third party for a payment equal to the interests’ market value.

Receipt upon dissolution


Anything received by a partner in relation to the final dissolution of the partnership is ignored.

Exclusion: actual disposal to third party


This section does not apply to the extent to which a partner of the partnership disposes of their partner’s interests in the partnership to persons who are not associated with them. For the purposes of testing association, the partners’ partnership capacity is ignored.

Exclusion: partnerships of persons in marriage, civil union, or de facto relationships


This section does not apply if—


immediately before the dissolution, there are only 2 partners of the partnership and they are married to each other, in a civil union together, or in a de facto relationship together; and


the dissolution is caused by death of a partner, or the dissolution relates to the settlement of relationship property; and


on dissolution, all partner’s interests of 1 person are transferred, ignoring any intervening transfer to an executor or administrator, to the other person; and


the transfers of those partner’s interests are subject to provisions in subpart FB or FC (which relate to transfers of relationship property and gifts), and those provisions treat the transfers as disposals for amounts that are not the interests’ market values.

Relationship with subject matter


This section overrides sections HG 5 to HG 10.

Defined in this Act: amount, associated person, dispose, partner, partner’s interests, partnership, settlement of relationship property

Section HG 4: substituted (with effect on 1 April 2008), on 6 October 2009, by section 270(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).