Partnerships Chapter 7 - Partnerships Chapter7 A Review of...

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Click to edit Master subtitle stylePartnershipsChapter 7Operating Distributions by Partnerships
A. Review of Basis ConceptsnA partner's outside basis nundistributed, taxed partnership income n+ cash contributedn+ basis of contributed property n+ liabilities assumed.nCapital account:nthe book value of a partner's partnership interest. nProceeds received on liquidation of partnership assets and special allocations of income and deductions must be reflective of capital account values.
Review of Basic Concepts ContinuednA partner's inside basis is his share of the partnership's tax basis. It is the same as his outside basis if —n1.He is the original partnern2.He buys into the partnership and a Sec. 754 election is made to write up his share of the partnership tax basis
B. CONSEQUENCES TO THE DISTRIBUTEE PARTNERnNonrecognition Rules on the Distribution:nDistributions of CashnInclude reduction in share of partnership liabilities.nGeneral Rule under Section 731(a) - a partner recognizes neither gain nor loss on a current distribution of cash.nUnder Section 733 - a partner's outside basis is reduced but not below zero by the amount of the distribution.nCASH Distributions in excess of basis are taxed.
Distributions of PropertynSec. 732 (a)nThe partner's outside basis is reduced by the partnership's tax basis of the property distributed. nSec. 731 (a) (1)nNo loss is recognized on a distribution of partnership property. An excess distribution of cash is taxed as a capital gainnThe basis of the distributed property to the distributee is a carryover basis. nIf partnership property distributed has a basis greater than the partner's outside basis for his entire partnership interest, nThe property takes a substituted basis equal to the partner's outside basis.
Allocation of Basis to Distributed

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