Example of nonliquidating distribution


04-Jun-2020 18:41

When property is distributed to a partner, then the partnership must treat it as a sale at fair market value ().

The partner's capital account is decreased by the FMV of the property distributed.

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On the other hand, individual shareholders often prefer that the distribution be treated as a redemption, for three reasons: A distribution qualifies as a stock redemption only if it significantly reduces the interest of the shareholder in the corporation.

Generally, losses are only recognized in a liquidating distribution.