1203. Are retirement payments received from partnerships included in net earnings?

If you are a retired partner receiving retirement payments from a partnership of which you are a member or a former member, the payments are excluded from net earnings from self-employment (effective with taxable years ending on or after December 31, 1967) if:

1. The payments are made under a written plan of the partnership that meets the requirements prescribed by the Secretary of the Treasury. The written plan must also provide for periodic payments because of retirement, to partners generally or to a class or classes of partners, to continue at least until such partner's death; and

2. You provided no services in any business conducted by the partnership (or its successors) during the taxable year of the partnership ending within or with the taxable year in which you received payments; and

3. At the end of the partnership's taxable year referred to in (B) above, the other partners have no obligation to you other than for the retirement payments under the plan; and

4. Your share in the capital of the partnership has been paid in full by the end of the partnership's taxable year referred to in (B) above.

Last Revised: March, 2001