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.
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.
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.
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.