Liquidating distribution partnership basis

The author provides the background on such basis adjustments and provides many examples to help understand this complex tax area. A more sensible and equitable approach would allow the IRC Sec.

A distribution may result in a recognized loss to a partner only where the partner's interest in the partnership is being completely liquidated and he or she receives only cash, unrealized receivables as defined in IRC Sec. cash-basis accounts receivable), or inventory as defined in IRC Sec. Loss in recognized to the extent the partner's basis in the partnership exceeds the amount of cash and basis of such other assets received in liquidation of the interest. A more sensible alternative is to adopt an approach that would allow the IRC Sec. 12 (2/16/93), with respect to the special basis adjustment available to a partnership under IRC Sec. Although the new revenue ruling explains the IRS's stance on the issue more clearly, it unfortunately will lead to unfair results at the partnership level in many instances.Example 2: Partner A receives 1) Cash = ,000, and 2) Inventory (FMV = ,000, Basis = ,000) in liquidation of his partnership interest which had a basis of 0,000. Except for 1) distributions involving a disproportionate distribution of IRC Sec.751 "hot assets" and 2) payments considered as a distributive share of income or as a guaranteed payment under IRC Sec.

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