Liquidating distribution tax treatment

How you treat it depends upon whether this is a total payment or liquidation, or if it is part of an installment.

If you receive a total distribution that is less than your basis, you will have a capital loss.When it comes time to part ways, the partnership distributes its assets back to the partners and dissolves.Because the partnership is not a separate tax entity, any gains or losses pass through to the partners when the partnership liquidates.I will give the best answer that I can with the information provided.Publication 550 describes the tax treatment of this type of distribution.

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