A partner recognizes gain when she receives cash in excess of her outside basis in a liquidating distribution.

Question

Quizplus · Accepted Answer

When a partner receives cash in excess of her outside basis in a liquidating distribution, she has recognized gain. This is because the cash received is greater than the partner's adjusted basis in the partnership interest being liquidated. The partner must recognize gain to the extent of the excess cash received.

A Partner Recognizes Gain When She Receives Cash in Excess