Liquidating distribution partnership basis


He currently advises families on their insurance and financial planning needs.



When it comes time to part ways, the partnership distributes its assets back to the partners and dissolves.Because the partnership is not a separate tax entity, any gains or losses pass through to the partners when the partnership liquidates.Liquidating distributions might generate capital gains, ordinary income, a loss or no effect at all.The partner transfers his basis in the partnership to the property after accounting for any cash, receivables and inventory.

So if a partner had a basis of $10,000 in the partnership and received a liquidating distribution of $3,000 cash and a plot of land worth $25,000 he would allocate his remaining $7,000 of basis to the land.

§§301.7701-2 and -3, recognize partnership as the default tax classification for all domestic entities that are not organized as corporations or joint stock companies, or engaged in certain regulated businesses like banking and insurance.