A partner recognizes a loss when she receives cash and other property with inside bases greater than her outside basis in a liquidating distribution.

Question

Quizplus · Accepted Answer

In a liquidating distribution, a partner recognizes a loss only when the entire distribution consists of cash, unrealized receivables, or inventory items, and the partner's outside basis is greater than the sum of these items received. If other property (with inside basis) is involved, it does not automatically trigger a loss recognition.

A Partner Recognizes a Loss When She Receives Cash and Other