Differences between liquidating and nonliquidating distribution

The downside of deferral, however, is that in order to ensure that any gain in the partnership's assets is preserved, a complex set of rules governing the distributee partner's basis in the distributed property is required.

It is these rules -- those governing gain recognition and determination of partner basis -- that are the focus of this Tax Geek Tuesday.

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.

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).

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.

Test your small business acumen with this quiz sponsored by Chase Ink Providing payroll services that comply with ever-changing regulations and meet evolving employee and employer demands is no easy task.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.AB distributes cash of ,000 to A, and A’s ownership decreases from 50% to 30%.The distribution of ,000 is treated as a current distribution because it is not part of a series of distributions that will result in the termination of A’s interest.

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