Start Reporting liquidating distributions

Reporting liquidating distributions

Unlike the rules that apply to C corporations, which tax income both at the entity and at the owner level, the partnership rules are designed to only tax income once, at the owner level.

This discussion of the tax consequences of contributions to partnerships will also apply to limited liability companies unless the limited liability company has elected to be taxed as a corporation.

As with S corporations, the tax consequences of a distribution to a partner are heavily dependent on the partner’s basis in his partnership interest.

These rules (a) allocate the partnership’s income, losses, deductions, and credit among the partners and (b) adjust basis to reflect each partner’s allocation of those items.