Liquidating distribution accounts receivable
The book gain or loss on the constructive sale is apportioned to each of the partners' accounts.
Generally, there are no tax consequences of a current property distribution — there is never a taxable gain or loss, either to the partnership or to the partner.
When a partner contributes property to the partnership, the partnership's basis in the contributed property is equal to its fair market value ( You contribute land to a partnership with a tax basis of ,000 and a FMV of ,000. Since the FMV of the land is also ,000, you each have equal equity in the partnership, and the total inside basis of the partnership is equal to 0,000, your combined contributions.
However, your outside basis differs from your partner's, since your outside basis is ,000, while that of your partner's is ,000.
When property is distributed to a partner, then the partnership must treat it as a sale at fair market value ().
Any remaining allocable basis is then assigned to the remaining properties, reduced by any excess basis over the partner's remaining interest.
Generally, the carryover basis of each property will be equal to the partnership's basis in the property, but since the total of the property basis cannot be greater than the partner's outside basis minus any money received, then any excess basis must be allocated among the properties.
Basis must 1 be allocated to unrealized receivables and inventory items.
Generally, losses are only recognized in a liquidating distribution.
No gain is recognized from a distribution of cash or marketable securities that can easily be converted to cash, unless the distribution is more than the partner's outside basis, in which case, the excess is taxable as a capital gain.