Liquidating limited partnerships
This excess basis is subject to the depreciation rules, lives, and methods in effect at the time of the distribution (Sec. Holding Period for Distributed Assets A member's holding period for property received in a nontaxable distribution includes the holding period of the LLC (Secs. This rule applies whether the member receives the property in a current distribution or a liquidating Suspended Losses If an LLC distributes assets to a member in a liquidating distribution and those assets have been used in a passive activity, the member continues to carry over any suspended passive activity losses (PALs) with respect to that activity.The suspended PAL is allowed without limitation if the member disposes of substantially all of the passive activity (or his or her interest in the activity) in a taxable disposition to an unrelated third party (Sec. Accordingly, if a member receives only cash in complete liquidation of his or her LLC interest, it appears any suspended PALs generated by the LLC's activities should be fully deductible in the year of the liquidating basis from the same activity (Sec. Any losses suspended because of lack of basis under Sec.This guidance provides a basic overview of insolvency and liquidation proceedings and more detailed information about the documents that must be delivered to the Registrar of Companies.It summarises some of the rules that apply to company voluntary arrangements, moratoria, administrations, receivers, voluntary liquidations, compulsory liquidations and EC regulations.Recognizing a loss on a liquidating distribution: V has a ,000 basis in L LLC, which is classified as a partnership.L distributes ,000 cash and inventory worth ,000 to V in complete liquidation of her LLC interest.704(c)(1)(B)); (3) the distribution is within seven years after a contribution of appreciated property (see Sec. He has never contributed property other than cash to the LLC.737); or (4) the distribution is part of a disguised sale (see Sec. A loss may be recognized upon a distribution in liquidation of a member's interest if no property other than cash, unrealized receivables, and inventory is received. Nontaxable liquidating distribution of cash and property: Z LLC is liquidating. To liquidate his interest, Z distributes to R ,000 cash plus real property with a ,000 FMV.
J has decided to leave the LLC, and A and B have agreed that the FMV of his interest is 0,000.
704(c)(1)(C) property) in liquidation of its interest in the LLC, the LLC's adjusted basis in the distributed property immediately before the distribution includes the Sec. 704(c)(1)(C) basis adjustment for the property in which the member relinquished an interest, if any, by reason of the liquidation. 704(c)(1)(C) basis adjustment reallocation are netted, and the net amount is allocated under Regs. 734(b) adjustment that would arise from the Depreciation Methods Available After Liquidating Distribution A member who receives a liquidating distribution of depreciable property acquires a depreciable basis in the property.
To the extent the transferee member's basis does not exceed the LLC's predistribution basis, the member assumes the LLC's role and continues to depreciate the property using the remaining life and method used by the LLC (Sec. If the member's basis exceeds the LLC's predistribution basis, the excess is treated as newly acquired property that is placed in service by the distributee at the time of distribution.
The LLC can make a liquidating distribution of cash and marketable securities up to the retiring member's basis and then distribute other property for the balance of the required Warning: The IRS recharacterized as a taxable distribution of cash the distribution of a personal residence to a partner in liquidation of his interest.
In Chief Counsel Advice 200650014, the IRS addressed a situation where a partnership formed an LLC to acquire a house for distribution to the retiring partner under the terms of a redemption agreement.