ABC distributed to those two partners promissory notes that ABC had recently acquired (for which ABC was responsible for paying) in complete liquidation of those two partners interests in ABC. ABC then sold the parcels of real estate that it had intended to sell, and the partnership and the remaining partners recognized the gain of those sales.

Then, the two partners whose interests in the partnership had been liquidated demanded payment of the promissory notes that they had received in connection with the liquidation of their interests in the partnership and received from the partnership the amounts due on the promissory notes (which approximated the value of their interests in the partnership that had been previously liquidated).

What are the tax consequences of these transactions to the partners whose interests were liquidated?

Do these transactions violate any of the anti-abuse provisions that apply to partnerships?

If the Internal Revenue Service takes the position that the substance of these transactions was to allow the partners whose interests in the partnership were liquidated to avoid certain taxes, what outcome could be expected?