Question

In which type of distribution may a partner recognize a loss on the distribution?

a. Both operating and liquidating distributions.
b. Neither operating nor liquidating distributions.
c. Operating distributions.
d.Liquidating distributions.

Answer 1

In liquidating distributions, a partner may recognize a loss on the distribution if the fair market value of the distributed assets is less than the partner's adjusted basis.

Step-by-step explanation:

In the case of , a partner may recognize a on the distribution. A liquidating distribution occurs when a partnership is dissolved and its assets are distributed to the partners.
If the fair market value of the distributed assets is less than the partner's adjusted basis, the partner may recognize a loss.