Ps Ch 25 - Disproportionate Distributions

Front 1

What is the general rule for recognition of gain or loss when a partner receives a distribution of cash from a PS?

Back 1

He does not recognize gain or loss, rather, his outside basis is reduced by the amount of cash distributed. However, to the extent the cash distributed exceeds the partner's outside basis, the partner must recognize gain.

Front 2

What is the general rule for recognition of gain or loss when a partner receives a distribution of property?

Back 2

Generally, the partner does not recognize gain or loss, rather the partner's outside basis is reduced by the basis of the asset distributed. To the extent the basis in the property is larger than the partner's outside basis, the basis in the property in reduced to reflect the partners's outside basis, then the asset is distributed. The partner will then have a zero outside basis.

Front 3

What are the three exceptions to the general that there are no tax consequences when property is distributed from a PS to partner?

Back 3

1. Disproportionate distributions
2. Distributions of property previously contributed by a partner
3. Distributions to a partner who had previously contributed appreciated propety.

Front 4

What is the rationale for the recognition rules for distribution of property?

Back 4

Each partner has an indirect ownership in the underlying PS property. Each partner is also responsible for an allocable share of the underlying gain or loss in each partnership item.

Front 5

Determining how much of the PS gain or loss a partner is responsible for is only part of the picture. The other part is:

Back 5

The character of the gain or loss. The Code does not permit the partners to effectively shift the character of the income, gainn, or loss amoung the partners when making a distribution.