In a proportionate nonliquidating distribution of cash and a capital asset, the partner recognizes gain to the extent the amount of cash distributed exceeds the partner's basis in the partnership interest.

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When a partner in a proportionate nonliquidating distribution of cash and a capital asset receives more cash than their basis in the partnership interest, they will recognize a gain equal to the amount of the excess cash. This gain is taxable as a capital gain. Conversely, if the partner receives less cash than their basis, they will recognize a loss equal to the amount of the deficiency, which is also a capital loss. Therefore, the partner recognizes gain to the extent that the cash distribution exceeds their basis in the partnership interest.

In a Proportionate Nonliquidating Distribution of Cash and a Capital