Example of partnership liquidating distribution

Posted by / 13-Jun-2018 07:26

Tax Treatment of Partnership Distributions IRC Sec.731(a) (1) generally provides that a partner receiving a distribution of cash or other property from a partnership, recognizes gain only to the extent that cash distributed exceeds the partner's basis in his or her partnership interest immediately before the distribution.736(a) treatment for liquidation payments where capital is a material income producing factor.Such payments must be treated as made in exchange for the partner's interest in partnership property under IRC Sec. Finally, except for disproportionate distributions under IRC Sec.In 1993, Partner A receives a distribution of Cash = ,000 and Partner B receives a distribution of Blackacre (FMV ,000, Basis = 45,000).

Example 4: Partners A and B each have a basis of ,000 in their respective partnership interests.

Where one class of assets is distributed, but no property of that class is retained by the partnership (or the retained property of the same class has insufficient inherent gain or loss to fully absorb the IRC Sec.

734 basis adjustment), the amount of the unabsorbed basis adjustment is suspended until the partnership acquires property of the same class in the future.

12 (2/16/93) states the Internal Revenue Service's position on the special basis adjustment available to partnerships under IRC Sec.

734 basis adjustment precisely when the partnership acquires a legal obligation for future liquidation payments entailing a fixed amount and timing. 734(b) in connection with certain deferred liquidation payments to a retiring partner or a deceased partner's successor.

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736(a), any gain or loss recognized by the partner is treated as having resulted from a sale or exchange of the partner's partnership interest (i.e., generally capital gain). 736(a) payments generally include payments (determined with or without regard to the income of the partnership) which are paid for either 1) unrealized receivables, or 2) partnership goodwill where payments for goodwill are not called for in the partnership agreement.