Loss cannot be recognized on a distribution from a partnership unless cash, unrealized receivables, and/or § 1231 assets are the only items distributed.

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Loss can be recognized on a distribution from a partnership even if cash, unrealized receivables, and/or § 1231 assets are the only items distributed, as long as the distribution results in a decrease in the partner's basis in their partnership interest.

Loss Cannot Be Recognized on a Distribution from a Partnership