Liquidating cash distributions taxable

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Example: David and Daniel are 50/50 partners in ABC LLC.For example, increasing adjustments are made for additional contributions you make and to reflect your share of partnership income, whereas decreasing adjustments are required for partnership losses and profit withdrawals.Upon liquidation of a partnership, the Internal Revenue Service views the distributions as a sale of a partnership interest; as a result, gains are generally taxed as long-term capital gains to partners.If your basis is zero, this means the amount you eventually sell the property for is all taxable gain.Before you can figure out the tax effects of the liquidation, you'll need to know your adjusted tax basis in the partnership.

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