Liquidating cash distributions taxable

If the partnership distributes property -- anything other than cash and property treated as cash -- during its liquidation, it has no immediate tax effect.

Distribution of partnership assets can be done as either current distribution or liquidating distribution.When a business operates as a partnership, the partners each report a percentage -- which is usually the same as their percentage of ownership -- of annual earnings on their personal returns.As a result, the tax effects of a partnership that makes liquidating distributions only impacts the partners who receive them.If your basis is zero, this means the amount you eventually sell the property for is all taxable gain.Before you can figure out the tax effects of the liquidation, you'll need to know your adjusted tax basis in the partnership.

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Provided the liquidation terminates your entire interest in the partnership, your tax basis in the distributed property is equal to your adjusted basis in the partnership interest minus the cash distributed to you.

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