For a discussion of related federal tax rules applied to partnerships, see 710 T. M., Partnerships—Formation and Contributions of Property or Services ; 712 T.
M., Partnerships—Taxable Income; Allocation of Distributive Shares Capital Accounts; 714 T. Partnership Distributions-In General Introductory Material A.
Part I, Introduction, briefly discusses important general principles not directly related to distributions, but that will nevertheless frequently be referred to throughout the Portfolio, including partnership capital accounts, §704(c) and reverse §704(c) allocations.
Part I then addresses the vexing question of distinguishing a partner withdrawal from sale of a partnership interest (which are considered in more detail in 718 T. Partnerships—Disposition of Partnership Interests or Partnership Business; Partnership Termination).
M., Partnerships—Allocation of Liabilities; Basis Rules; 718 T.
M., Partnerships—Disposition of Partnership Interests or Partnership Business; Partnership Termination; and 720 T. For a discussion of the specific tax issues related to limited liability companies, see 725 T. For a discussion of the specific tax issues raised by foreign partners or foreign partnerships, see 910 T. Section 704(c) (and Reverse § 704(c)) Adjustments C.
Distributions, usually liquidating distributions, are important components of major partnership restructurings, including divisions, mergers, incorporations, and changes in legal form. Partnership's Inside Basis Adjustment under § 734(b) 2. Tiered Partnerships (1) Adjusting Through the Tiers (2) Distribution of Lower-Tier Partnership Interest b. Other Property Distributed to Contributing Partner-§ 737 F.
Liquidating Distribution to a § 1.752 Liability Partner 4. Part III deals with the specific tax consequences of current distributions, including the basis of distributed property, the effects on the outside basis of the distributee partner's interest of money and property distributions, and the effects on the inside basis of the partnership's assets of in-kind distributions, as well as the effects of §751 to recharacterize non-pro rata distributions by partnerships that have §751 property and other property as taxable exchanges instead of nonrecognition distributions. The tax consequences of liquidating distributions are discussed in Part IV, including the different rules for the basis of distributed property, and the effect on the partnership's inside basis of gain or loss recognized by the distributee partner. Payments and Transfers That Are Not Distributions 1. Part I concludes with a brief discussion of the general anti-abuse regulations. Part II discusses the principles applicable to all distributions—current and liquidating—including distinguishing between them—and the general principles for nonrecognition of gain or loss on distributions of partnership property in kind, and the effect of partnership liability shifts as part of distributions. Finally, Part V analyzes §736, which characterizes partnership payments made to a retiring partner or the successors of a deceased partner, dividing them between those that are liquidating distributions allocable to the retiring or deceased partner's interest in the partnership (including goodwill and similar intangibles) that are governed by the principles discussed in Part IV, and any other withdrawal payments, which are classified as either distributive share payments, with their character determined by the allocable share of partnership income, or guaranteed payments, which are ordinary income to the distributee without regard to partnership income, depending on whether their amount is determined by partnership income or not, and are, in effect, deductible (or excludible) by the partnership (remaining partners). It also addresses estate and income tax considerations relevant to a deceased partner's successors, other than those involving §736. Basis Adjustment Without § 754 Election: Liquidating Distributions-§ 732(d) a. Distribution and Contribution of Partnership Assets (Assets-Up) b. Basis Allocations in a Series of Liquidating Distributions 3. Mandatory Application of § 732(d) in Liquidating Distributions D. Effect on Partnership's Inside Basis-§ 754 and Substantial Basis Reduction 1. Elective Application of § 732(d) in Liquidating Distributions b.