Partnership liquidating distribution marketable securities facts about dating websites
Editor's note: This case study has been adapted from "PPC Tax Planning Guide--Partnerships," 13th edition, by Grover A.
| DISGUISED SALE | MARKETABLE SECURITIES | DISTRIBUTION OF PRECONTRIBUTION PROPERTY TO ANOTHER PARTNER | DISTRIBUTION OF PROPERTY TO A PARTNER WHO CONTRIBUTED PRECONTRIBUTION PROPERTY | DISPROPORTIONATE DISTRIBUTIONS | LIQUIDATING DISTRIBUTIONS TO RETIRING OR DECEASED PARTNERS WHEN "HOT ASSETS" ARE PRESENT | COMPARISON OF LIQUIDATING DISTRIBUTIONS FROM A CAPITAL INTENSIVE PARTNERSHIP TO A SERVICE ORIENTED PARTNERSHIP | INCOME ALLOCATION CLOSE OF A PARTNER'S TAX YEAR WHEN INTEREST IS SOLD | OTHER DISPOSITIONS OF PARTNERSHIP INTERESTS | 1.
The partner assigns a basis to the security received in the distribution following the standard ordering rules.
The term marketable securities is broadly defined and includes almost any debt or equity interest that is actively traded, including options, futures contracts, indices, and derivatives.
Part of this transaction is a disguised sale, when the contribution of the land and the receipt of the cash payment are viewed together.
Janet reports a nontaxable transfer of one-fourth of the land to the partnership under 721, and a sale of three-fourths of the land for 0,000.
This could include marketable securities not marketable when acquired by Royal Monarch or perhaps stock purchased through a private placement, but which might go public in the near future.
Conclusion If Chuck wishes to avoid recognizing gain on the liquidation of his partnership interest in Royal Monarch Company, the tax adviser should counsel against distributing all 300 shares of the partnership's IBN-TELco stock to Chuck.
At the time of the transfer, land J was worth 0,000 and had an adjusted basis ,000. made a special distribution of 0,000 in cash to Janet.Because of this "marketable securities equals money" rule, if Chuck wants to avoid gain recognition on the distribution, his tax adviser should suggest the parties consider distributing another mix of assets. This mix should include other investment assets that will be treated as property. Under the gain limitation rule, therefore, the amount of securities treated as money would be reduced by this ,000 to ,000, reducing Chuck's gain on the distribution from ,000 to ,000.
If this distribution were made, Chuck would acquire a ,000 basis in the distributed IBN-TELco stock, which is the sum of the ,000 basis he would have acquired under the general rules for determining the basis of distributed properties in a liquidating distribution plus the ,000 gain recognized because the securities were marketable. Thorsen, published by Practitioners Publishing Company, Fort Worth, Tex., 1999.
He believes the distribution would be a nontaxable property distribution.