The distributive share of receivables is in excess of some of the partners' basis. How does a partner receive unrealized A/R?
Except as provided in paragraph (c)(1)(iii) of this section, the basis to be allocated to properties distributed to a partner under section 732(a)(2) or (b) is allocated first to any unrealized receivables (as defined in section 751(c)) and inventory items (as defined in section 751(d)(2)) in an amount equal to the adjusted basis of each such property to the partnership immediately before the distribution.
How does a partner receive unrealized A/R?
Partnership is using the accrual method
The distributive share of receivables is in excess of some of the partners' basis.
CP Hay wrote:What though if the partnership dissolves and then next year determines that those receivable won't be collected after all. Seems like a pain to have to go back and amend. If a partnership has a lot of A/R it's almost inevitable that some go uncollectible. I'm curious to know if anyone has experienced this.
CP Hay wrote:What happens though if, after the A/R is distributed, the partners are unable to collect?
What happens though if, after the A/R is distributed, the partners are unable to collect?
Any gain realized or loss sustained by a partner on a sale or exchange or other disposition of unrealized receivables (as defined in paragraph (c)(1) of § 1.751-1) received by him in a distribution from a partnership shall be considered gain or loss from the sale or exchange of property other than a capital asset.
Permanently-Diff wrote:This is what I speculated about in previous post 4. Because the receivables aren't unrealized receivables, I believe the sale of those assets are capital in nature.
But there is no sale of an asset here, only the collection of a distributed A/R.
Also, this A/R in the hands of the partner is not a capital asset since the original sale at the partnership level constituted ordinary income.
If you sold land in exchange for a note, and collected the money over x years, isn't that still a sale albeit an installment sale?
So that would mean you couldn't installment sale them, which brings us back to the original question, how to report the collection of the AR. What if the collection spans multiple tax years?
Why would you report the collection of an A/R?
Of course. But I'm not getting the correlation here.
What if you don't collect all of it? What if you collect some in one tax year and some more in another tax year? What if you collect the AR but the basis of the AR doesn't equal the cash collected? You'd need to report it on the partner's tax return somehow, right?
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