Liquidating distribution for partnership


After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain.

Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock.

When a partnership ends, the partners begin a complicated process of fulfilling financial obligations to creditors and each other.

The assistance of legal and accounting professionals can help smooth this process.

If either partner's capital account has too little money to pay the appropriate share, that partner usually pays the balance from personal funds.

When one of several partners cannot pay the owed share of the money, the other partners pay that partner's share, splitting the remaining balance based on agreed-upon loss-sharing percentages.

If the total liquidating distributions you receive are less than the basis of your stock, you may have a capital loss.

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The partners receive money from the liquidation of the business last, after the debts have been paid off.

A liquidation marks the official ending of a partnership agreement.

To end the partnership, the parties involved sell the property the business owns, and each partner receives a share of the remaining money.

In such a case, creditors can usually claim and resell personal assets that belong to the partners.

In addition, each partner is personally liable for the entire debt owed, even if any given partner had only a small partnership interest in the business.

If you acquired stock in the same corporation in more than one transaction, you own more than one block of stock in the corporation.

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