Liquidating distribution worksheet

Posted by / 28-Dec-2019 10:43

Liquidating distribution worksheet

Current distributions generally result in recognized gain to the distributee partner only when the money distributed exceeds the adjusted basis of the distributee’s partnership interest.

The following example demonstrates these principles: Reggie’s Diner, LLC (“Diner”) is owned 1/3-each by partners George, Jerry, and Cosmo.

As measured just prior to the distribution (but after the borrowing), each partner’s tax basis in his partnership interest is adjusted to 0,000, 0,000, and 0,000; respectively.

The distribution proceeds then reduce each partner’s tax basis in his partnership interest to

One way partnerships can accomplish this is by entertaining a debt-financed distribution to these partners.Assume that no partner or related person bears the economic risk of loss for this loan and that the partners’ shares of this partnership liability are 0,000, 0,000, and 0,000; respectively.Diner immediately distributes the loan proceeds to its partners, with 0,000 distributed to George, 0,000 distributed to Jerry, and 0,000 distributed to Cosmo.Hence, the gain effectively is deferred to the later year of the sale transaction.This provides for a highly desirable result in the year of the debt-financed distribution, but partners may lose sight of the “end game” here, particularly when many years separate the original distribution from the “end game”.

, 0,000, and 0,000; respectively.

One way partnerships can accomplish this is by entertaining a debt-financed distribution to these partners.Assume that no partner or related person bears the economic risk of loss for this loan and that the partners’ shares of this partnership liability are 0,000, 0,000, and 0,000; respectively.Diner immediately distributes the loan proceeds to its partners, with 0,000 distributed to George, 0,000 distributed to Jerry, and 0,000 distributed to Cosmo.Hence, the gain effectively is deferred to the later year of the sale transaction.This provides for a highly desirable result in the year of the debt-financed distribution, but partners may lose sight of the “end game” here, particularly when many years separate the original distribution from the “end game”.

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George recognizes a capital gain of $25,000 on his receipt of this cash, which is treated as a current distribution.

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