As noted in my response, this is not a technical termination, it is a complete termination of the partnership / LLC.
You need to have more than one member in the LLC for the entity to be treated as a partnership. Based on your facts, once you only have one member, it is no longer a partnership. It becomes a single member LLC.
I am also providing a link to IRS revenue ruling 99-6 which has some discussion of your situation. You are situation 1, except that you have members A, B and C and not just A and B as noted in the example. The end result of the transaction is the same though.
<a rel="nofollow" target="_blank" href="
https://www.irs.gov/pub/irs-drop/rr-99-6.pdf">https://www.irs.gov/pub/irs-drop/rr-99-6.pdf</a>
A short period tax return should be filed for the period that the entity was a true partnership. I do not agree with the advice that you should recognize any gain or loss as a result of this transaction. That position is supported in the attached revenue ruling. You will take a basis in the assets distributed equal to either the adjusted basis that the LLC had in the assets, or equal to your basis in your LLC interest. This is where this gets somewhat complicated, however, there is no gain or loss. There is an exception to this rule, however, I do not believe you fall within that exception; and the exception is only to be able to recognize a loss.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
