A partner will recognize a loss from a liquidating distribution when the distribution includes only cash, unrealized receivables, and inventory and the partner's outside basis is less than the sum of the bases of the distributed assets.

Question

Quizplus · Accepted Answer

In a liquidating distribution, a partner will recognize a loss only if the entire distribution consists of cash, unrealized receivables, or inventory, and the partner's outside basis is greater than the cash and the fair market value of the property received. If the outside basis is less than the sum of the bases of the distributed assets, it does not automatically result in a recognized loss.

A Partner Will Recognize a Loss from a Liquidating Distribution