Proportionate nonliquidating distribution examples

Posted by / 29-Oct-2020 11:09

Proportionate nonliquidating distribution examples

Ex: Partner A, with an adjusted basis of ,000 in his partnership interest, receives in a current distribution property having an adjusted basis of ,000 and a FMV of ,000 to the partnership immediately before distribution, and ,000 cash.

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

After property 1 appreciates to a value of ,000, 1/2 of the property is distributed to R in the example above, along with ,000 in cash.Ex: Partner R has an adjusted basis of ,000 in his partnership interest.He receives a current distribution of ,000 cash and property 1 with an adjusted basis to the partnership of ,000 and a FMV of ,000.Instead, the gain of ,000 is preserved by giving A a basis in the property of ,000.Now, if A sells the property for its FMV of ,000, A will recognize the ,000 of gain that the partnership did not recognize.

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To the contrary, when a partnership distributes appreciated property, the general rule is one of  no gain is recognized by the partnership, and instead the gain will be recognized when the distributee partner sells the property.

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