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.In liquidating distributions, a gain will still be recognized since the sum of cash distributed and john’s basis on the distributed inventory is more than john’s outside basis.... 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.The partnership just assumes the same basis as the partner.If the partnership disposes of the property at liquidation, that partner must recognize the gain or loss as if he had sold it himself rather than having the gain or loss allocated among all the partners.
That allows the partner to receive distributions up to his basis as a tax-free return of capital.
When partners form the business, they might contribute property that has changed in value since they purchased it.
Contributions to the formation of a partnership generally don’t require the partner to recognize any gain or loss.
734(b) as it relates to certain deferred liquidation payments to retiring partners or the successors of deceased partners.
12 (2/16/93) states the Internal Revenue Service's position on the special basis adjustment available to partnerships under IRC Sec.