Liquidating distribution two years

We do that with the style and format of our responses.

since we've had a Tax Geek Tuesday, but that's not to say I've shirked my responsibility of trying to make sense of the nether regions of the Internal Revenue Code.

However, partner S, the other 50% partner, continues to have an outside basis in his partnership interest of ,000, because he is unaffected by the distribution to R.

As a result, if the partnership is liquidated and the remaining ,000 of cash is distributed to S, S will recognize ,000 of loss under the rules discussed below for liquidating distributions.

This is primarily attributable to the fact that when a corporation (whether C or S) makes a distribution of appreciated property, the corporation recognizes gain as if it sold the asset for its FMV.

But now that I'm settled in, I'm excited to get back to providing what no one ever really asked for: an in-depth look at a narrow area of the tax law. As you will see, the regime governing partnership distributions is drastically different from the one governing corporate distributions.

The basis of the property in A's hands will be ,000, the same basis the partnership has in the property.

Before the distribution, the appreciation inherent in the asset held by the partnership was ,000 (,000-,000).

Under Section 731(b), a partnership that makes a current distribution does not recognize any gain or loss, and a partner who receives a current distribution cannot recognize a loss.

The partner will recognize gain, however, to the extent that the money he receives in the distribution exceeds his basis in his partnership interest (also known as "outside basis") immediately before the distribution.

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