Differences between liquidating and nonliquidating distribution
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.
After the distribution, all that will remain within the partnership is ,000 in cash (,000 - ,000 distributed to R).
Paychex's Tom Hammond discusses common payroll considerations for CPA firms.
since we've had a Tax Geek Tuesday, but that's not to say I've shirked my responsibility of trying to make sense of the nether regions of the Internal Revenue Code.
Rather than requiring the partnership to recognize ,000 of gain upon the distribution to A, however, as shown above, no gain is recognized.
Instead, the gain of ,000 is preserved by giving A a basis in the property of ,000.
What gives Looking at things logically, assume that R received his ,000 of outside basis by contributing ,000 of cash to the partnership for a 50% interest. Partner S also contributed ,000 for a 50% stake.
The partnership then takes ,000 of the ,000 of cash and purchases property 1.
Ex: Partner R has an adjusted basis of ,000 in his partnership interest.
No gain is recognized by R because the cash received (,000) does not exceed R's outside basis in his partnership interest. In this example, at first blush it appears that more than the ,000 of gain inherent in the partnership's property 1 will be recognized when R sells the property.
R has taken a basis of ,000, so that when he sells property 1 for its FMV of ,000, he will recognize ,000 of gain.
For the past few months, I've been traveling around the country teaching the finer points of the Affordable Care Act and the repair regulations in such exotic locales as Hartford, Grand Junction and Billings, which is every bit as depressing as it sounds.
But now that I'm settled in, I'm excited to get back to providing what no one ever really asked for: an in-depth look at a narrow area of the tax law. As you will see, the regime governing partnership distributions is drastically different from the one governing corporate distributions.