If a liquidating distribution results in a capital gain or loss to the recipient partner, the partnership must make a positive or negative adjustment to the basis of its remaining capital or § 1231 assets equal to such gain or loss.

Question

Quizplus · Accepted Answer

In a liquidating distribution, it is the recipient partner who must adjust their basis in the partnership interest for any gain or loss recognized as a result of the distribution, not the partnership adjusting its assets' basis.

If a Liquidating Distribution Results in a Capital Gain or Loss