Liquidating distribution partnership basis


Hi, Can someone explain the difference between liquidating and nonliquidating distribution?I understand a partner recognizes no loss when liquidating distribution is received. If a partner receives liquidating distribution, is the partner no longer partner? All right, let me joggle my dusty memory to recall this concept.The most fundamental differences between liquidating and non-liquidating distribution are: - As apparent from the terms, in case of liquidating distribution, partner's basis in the partnership eventually goes down to zero (completely liquidated). In case of non-liquidating distributions, partner continues to be a partner.- Also, in liquidating distribution, partner's basis go down to zero and any property received from the partnership must be valued accordingly to bring down the partner's basis to zero.This is generally the pre-distribution basis the partner has in their partnership interest. As such, the property distributed to you will have a zero basis.In addition, you will be subject to the depreciation recapture rules when you sell the property. One part I don't know is how to make this work in turbotax.People come to Turbo Tax Answer Xchange for help and answers—we want to let them know that we're here to listen and share our knowledge.



Since the property will take a zero basis, just note in the software the final date of the partnership return, the software should compute the appropriate depreciation.Two things: You need to treat the property as if it was a distribution, not a sale.Yes, I would imagine that the property does have a value greater than your zero basis.In case of non-liquidating distribution, basis of property received is lower of property adjusted basis or partner's basis less cash received (in other words, you don't have to zero-out the partner's basis mandatorily).