"Treasury Stock" in a partnership

[SweetLeaf]

A partnership that I'm working on had a few partners sell their interest and part of that interest was sold back to the partnership.  Is this allowed?  Doesn't it need to flow thru to something?  

[PhoebeRoberts · Accepted solution]

The leaving partner's remaining capital account gets distributed among the remaining partners. (IRC 704 presumably tells you how; I don't know off the top of my head.) This is one of the reasons that capital accounts don't represent outside basis.

[SweetLeaf]

Thank you so much for your insight!  I'll take a look at the rules