Liquidating distribution return of capital

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. A number of problems have emerged, particularly for LLCs treated as disregarded entities, including a controversial decision by the IRS to treat the disregarded entity as the one responsible for payroll taxes for its employees, and questions about the status of recourse liabilities of a disregarded entity, particularly one that owns a partnership interest. This Portfolio analyzes not only the relevant statutory and regulatory materials, but also the large body of case law, revenue rulings, and other IRS pronouncements, including technical advice memoranda and private letter rulings, that are all part of this, unfortunately complex, body of tax law. 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.

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. Changing the State Law Form of a Tax Partnership b. Unincorporated Tax Partnership Entity to Corporation V. Distributive Share or Guaranteed Payments-§ 736(a) 1. Despite these factors, the Check-the-Box regulations, Regs. Reducing Outside Basis for Unsatisfied Assumed Partner Obligations a. §§301.7701-2 and -3, recognize partnership as the default tax classification for all domestic entities that are not organized as corporations or joint stock companies, or engaged in certain regulated businesses like banking and insurance.

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