Terminating and liquidating a non qualified plan
R first reduces his $52,000 outside basis by the $15,000 cash distribution.
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 $15,000 cash plus real property with a $50,000 FMV.Because the distribution is proportionate, the hot asset rules of Sec. V has a $4,000 capital loss on the liquidating distribution, computed as shown in the exhibit Under the general distribution rules, V can allocate only $6,000 of basis to the distributed inventory—its adjusted basis to the LLC (Sec. This leaves V with $4,000 of remaining basis in her interest but with no other distributed assets to absorb the additional basis.Consequently, she is allowed a $4,000 capital loss on the liquidation of L (Sec. Note: Gain or loss recognized on a liquidation may also affect the calculation of the member's net gain for purposes of the 3.8% net investment income tax.J will recognize no gain or loss on the distribution and will have a basis in the distributed office building of $500,000, the basis of his LLC interest after reduction for the $100,000 of cash received.(Note that the distribution of property with related depreciation recapture may result in the recognition of gain if the distribution is a disproportionate distribution of hot assets.) If the building continues to be Sec.Converting capital loss on a liquidating distribution to ordinary loss: J, A, and B are equal members in BC LLC, which owns several small commercial buildings in White Fish, Mont.
J has decided to leave the LLC, and A and B have agreed that the FMV of his interest is $500,000.
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 inventory has an adjusted basis of $6,000 to L.
V receives only her proportionate share of the inventory, and L has no unrealized receivables.
1231 property to J and he sells the building for its $400,000 FMV, he will realize a Sec.