Liquidating distribution from partnership

17-Oct-2017 17:42

If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally does not recognize any gain until the sale or other disposition of the property.

For exceptions to these rules, see Distribution of partner's debt and Net precontribution gain, later.

However, if a principal purpose for acquiring inventory property is to avoid ordinary income treatment by reducing the appreciation to less than 120%, that property is excluded.Also, see Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. The adjusted basis of Jo's partnership interest is ,000.She receives a distribution of ,000 cash and land that has an adjusted basis of ,000 and a fair market value of ,000.Recognition of gain under this rule also does not apply to a distribution of unrealized receivables or substantially appreciated inventory items if the distribution is treated as a sale or exchange, as discussed earlier.

Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is its adjusted basis to the partnership immediately before the distribution.

His basis for the distributed property is limited to ,000 (,000 - ,000, the cash he receives). The basis of property received in complete liquidation of a partner's interest is the adjusted basis of the partner's interest in the partnership reduced by any money distributed to the partner in the same transaction. A partner's holding period for property distributed to the partner includes the period the property was held by the partnership.

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