Partnership liquidating distribution detailed example

The

The $1,500 balance of each installment would be taxable gain, computed as follows: $6,000 (the amount of each installment) less $4,500 allocable portion to his basis.

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The $1,500 balance of each installment would be taxable gain, computed as follows: $6,000 (the amount of each installment) less $4,500 allocable portion to his basis.

,500 balance of each installment would be taxable gain, computed as follows: ,000 (the amount of each installment) less ,500 allocable portion to his basis.

is to subject the deferred payment redemption of a partnership interest with hot assets to the installment reporting provisions of §453.

Example — A retires from the ABC partnership and is to receive ,000 in two annual installments of ,000 each in liquidation of his interest in §736(b) property, none of which is §751 property.

The partner’s basis in his partnership interest is ,000.

The mechanism that prevents this assignment of ordinary income creates a fiction under §751(a) for a sale and a fiction under §751(b) for a redemption of a partnership interest.

A disproportionate distribution can occur when: 1) the partner receives more than his or her share of hot asset items in a partnership distribution; or 2) the partner receives less than his or her share of hot asset items in a partnership distribution; or 3) the distributee partner’s redistribution allocation of hot assets changes.

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