I’m Melting! Learning More About Partnership Taxation: Liquidating Distributions

Liquidating distributions are the distributions through which a partnership or limited liability company (LLC) terminates a partner's or a member's interest in the entity. Like current distributions, liquidating distributions are generally tax-free—in keeping with the flow-through nature of tax characteristics from pass-through entities. Complex basis rules apply for distributed property which preserve a partner's gain for later taxation when the partner eventually disposes of the distributed property.

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Related Content

• Partnership Taxation: Current (Non-liquidating) Distributions
  Distinguish liquidating distributions from non-liquidating, also known as current, distributions. Current distributions are distributions a partnership or LLC uses to distribute its earnings and other property to its partners or members in the normal course of business, as an ongoing entity. They differ from liquidating distributions, which are distributions that terminate a partner's interest in a partnership.
• Partnership and Other Pass-Through Entities Taxation Resource Kit
  Reference this resource kit providing information pertaining to the taxation of pass-through business entities such as partnerships, LLCs, and S corporations. Before beginning business as a pass-through entity, you will want to start with a review of the advantages and disadvantages of doing business as a pass-through entity. 

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