This Article is a practical exploration of the tax consequences of the alternatives for reducing a partner’s interest: by sale or by a liquidation distribution. Partnerships and limited liability companies do not last forever. Indeed, there comes a point in the life of many partnerships when it is time to retire or to eliminate the interest of one or more partners. There are essentially two forms of transactions for reducing or terminating the interest of a partner: a sale of the partner’s interest to another partner or a third party or a distribution from the partnership in liquidation of the partner’s interest. In some cases the economic effect of a sale or distribution will be the same. The binary nature of this choice, however, is deceptively simple. The variable tax consequences inherent in sales and liquidations of a partner’s interest raise some of the most complex issues in tax law that involve both technical and numerical challenges. In addition, although these issues arise at the reduction or termination of an interest, planning at the formation of a partnership is critical to resolution of questions about the termination of a partner’s interest. With examples, the Article is an attempt to guide the practitioner through an analysis of the statutory and regulatory rules affecting the taxation of sales and liquidation of a partner’s interest looking at the tax consequences to both the partners and the partnership. Although the Article is not an attempt to achieve the impossible—simplifying the excruciatingly complex analysis— the article tries to provide an analytical foundation for the myriad of difficult questions that arise on the context of removing a partner’s interest.