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Actually, the article is correct, but somewhat simplified for a casual reader.

As someone noted, it's very hard to know ahead of time how much of a gain you have, in the first place, if you focus on what your original cost was. The basis of a partnership interest changes as you go along, with income/losses earned, as well as distributions.

Add to that, you really don't know how much of the income reported is attributable what the article calls "tools". Actually, on a sale, the ordinary income part of a sale is the part of the gain attributable to the partnership's "hot assets" ("751 assets") - the ordinary income items such as inventory, recapture, etc.

Worse yet, and the article didn't mention, but the ordinary income can be MORE than the total gain, for which you then get a capital loss - the worst of both worlds.

Another reason to be wary of LPs in an IRA or other retirement plan, or exempt org.

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