Partnership Taxation: Liquidating Distributions

Summary

This practice note discusses the federal income tax treatment of liquidating distributions by partnerships and limited liability companies (LLCs) taxed as partnerships. It explains how Code Sections 731 through 736 and 751 apply when a distribution or series of distributions terminates a partner's or member's interest, including gain and loss recognition, Code Section 736 payment classification, money and marketable securities, distributed property, unrealized receivables, inventory, and basis allocation.