Liquidating vs nonliquidating distributions partnerships

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331 when they receive the liquidation proceeds in exchange for their stock.

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A partner’s initial basis in his partnership interest depends on how the partner acquired the interest.

Generally, shareholders are allowed to recover their entire basis before recognizing gain (Rev. On the other hand, filing a request for prompt assessment when there is only one shareholder might not be warranted.

This case study has been adapted from , 25th Edition, by Albert L.

331, a liquidating distribution is considered to be full payment in exchange for the shareholder’s stock, rather than a dividend distribution, to the extent of the corporation’s earnings and profits (E&P).

The shareholders generally recognize gain (or loss) in an amount equal to the difference between the fair market value (FMV) of the assets received (whether they are cash, other property, or both) and the adjusted basis of the stock surrendered.

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