A disproportionate distribution of hot assets is treated as though the partnership distributes a proportionate share of hot assets to the partner and then the partner sells those hot assets back to the partnership at fair market value in exchange for a portion of the assets actually received in the distribution.

Question

Quizplus · Accepted Answer

This statement describes the tax treatment of a disproportionate distribution of hot assets in a partnership. The IRS treats it as if the partner received a proportionate share of hot assets and then sold them back to the partnership for a portion of the assets actually received in the distribution, which can result in additional taxes for the partner.

A Disproportionate Distribution of Hot Assets Is Treated as Though