If the partnership makes an , the inside basis of the partnership property can be adjusted to reflect the purchase price paid by the partner.If the election is not made, the statute produces some inequitable results.The partnership will recognize a ,000 capital gain on sale of the property. During the first year of partnership operations, JT had net taxable income of ,000 and tax-exempt income of ,000.The partnership distributed ,000 cash to Juliet.
The two types of liquidating distributions receive differing tax treatment, as later sections of the chapter will explain.The tax treatment of disproportionate distributions is very complex.These ordinary income-producing assets, called and unrealized receivables.The terminated partnership is deemed to liquidate by transferring its assets and liabilities to a newly formed partnership, which continues its business operations.applies only to amounts that will ultimately be realized and recognized as ordinary income. RAY’s adjusted basis in the land immediately before the distribution is ,000. Her basis in the partnership interest immediately before the distributions was ,000. Matt’s basis in the partnership is ,000 before the distribution. Tim and Darby are equal partners in the TD Partnership. Tim needs cash in order to pay tax on his share of the partnership income, but Darby wants to leave the cash in the partnership for expansion.