A "technical termination" occurs when there is a sale or exchange of 50% or more of the total interests in a partnership’s capital and profits within a 12-month period. The partners may not have intended to terminate the partnership; even so, it is considered "technical" and is legally recognized as the end of one partnership and the beginning of another.
For tax purposes, the date of the technical termination marks the end of the tax year for the pre-termination partnership and the beginning of the tax year for the post-termination partnership. Once the termination occurs, the newly-created partnership must make new tax elections and determine new tax accounting methods. One thing that doesn't change is the EIN; it can remain the same for the new partnership.
Another thing that doesn't change is the basis amount. Any assets within the partnership prior to the technical termination are not considered distributed to partners. Therefore, the basis of the assets before and after the termination are considered the same.
On Form 1065 U.S. Return of Partnership Income, a partnership with a technical termination must indicate if the return is a Final Return or Initial Return. If the return is being filed for the pre-termination partnership, check Final Return. If the return is being filed for the post-termination partnership, check Initial Return.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.