Partnership liquidating distributions property
However, the partner can make an election to prorate the basis, if desired.
If the partner makes this election, gain will be recognized proportionately as in the purchase scenario.
Likewise, if there is a stepdown, the book deduction will be reduced.
In theory, if all the assets were disposed of, the acquiring partner's interest would end up back at book basis. 754 election, the incremental value of the partnership interest purchased will stay on the acquiring partners' books until the partnership interest is terminated. 754 election will create additional accounting work to maintain the two sets of books necessary to track the adjusted assets and their disposal. 754 election, the partnership must attach a statement to Form 1065, U. Return of Partnership Income, for the year of the sale, which should include the partnership name, address, and tax year in effect.
There is no picking or choosing which assets are to be considered.
If they do, the transaction is treated as a sale as described above. 736(a) payments are for a continuing share of partnership income or for guaranteed payments. 736(a) payments also include payments for unrealized receivables and for goodwill when goodwill payments are not called for in the partnership agreement.
The remaining partners should also be careful in making capital calls so that the substance of the capital calls cannot be construed as being used as a payment to liquidate the partner's interest. This treatment for unrealized receivables and goodwill applies only to general partners in partnerships where capital is not a material income-producing factor.
The resulting proportion of the total gain is realized each time a payment is received.
In the year of sale, the terminating partner will receive a final Schedule K-1, and there is no impact on the other partners that were not involved in this transaction.