If a partnership satisfies a $50,000 guaranteed payment obligation by distributing property to the partner with a fair market value of $50,000 and an adjusted basis of $40,000, the partner receiving the payment must recognize $10,000 of gain.

Question

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The partner does not recognize gain on the receipt of property as a guaranteed payment for services or for the use of capital. The gain or loss recognition rules apply when the partner subsequently disposes of the property.

If a Partnership Satisfies a $50,000 Guaranteed Payment Obligation by Distributing