Participant wants to transfer a limited partnership interest to his personal account to satisfy the age 70 1/2 required minimum distribution.

I fear this is a PT, and that the asset will be valued without a true market value.

How do I advise this participant?

I don't see it as a PT, but rather the host of problems that come from a distribution without a determinable value. You wouldn't know if the distribution necessarily satisfied the MRD, whether it was too much and if the document allowed in-kind distributions in excess of the MRD, and obviously what do you report on the 1099 as taxable income. Also, if they are pooled accounts, you certainly have an issue where the distribution affects others.

Advise him to get a formal appraisal before distribution. This transaction is reported on the Schedule R, so I imagine this increases the audit risk.

Try www.apboard.com. I'm of the opinion that what a third-party would pay is fair market value. Lots of room for debate, but its something you can print for the file.