Partnership liquidating distribution marketable securities
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. 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.A disguised sale occurs when a partner transfers property to a partnership and then receives a distribution of money or other consideration from the partnership such that, when viewed together, the transaction is more properly treated as a sale or exchange. partnership on March 28, 2004 in exchange for a one-third interest in Eagle.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 the stock was not an "unrealized receivable" or an "inventory item," the gain would apparently be capital gain. Also, the distribution is exempt if the partnership is an "investment partnership" and the distributee partner is an "eligible partner" (Sec. For this purpose, an "investment partnership" is a partnership that has never been engaged in a trade or business (other than investing, dealing or trading in investment assets) and the assets of which have always consisted of some combination of permitted investment assets (such as stock, financial instruments and the like).An "eligible partner" is a partner who did not contribute any assets to such a partnership other than those described in the definition of investment partnership (so long as such partner was not a transferor or transferee in a nonrecognition transaction involving the transfer of any portion of a partnership interest for which the transferor was not an eligible partner).
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.
Facts: Chuck, Willie and Harry are equal partners of Royal Monarch Company, a partnership they formed several years ago for joint investments.