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of any such gain or all of any such loss, as the case may be, was
to be recognized under section 731(a).28 Assuming arguendo that
28We seriously doubt that sec. 731(a) required petitioners
to recognize all of any gain or all of any loss, as the case may
be, realized upon Kildare Timmy’s distribution to Mr. Ramsburg of
the horses, stud rights, and bank account balance in question.
It is significant that if there were a gain realized upon such
distribution, the assets that Kildare Timmy distributed to Mr.
Ramsburg included not only money but Kildare Timmy’s racing and
breeding horses and stud rights. Under sec. 731(a), gain is not
to be recognized except to the extent that any money distributed
exceeds the adjusted basis of the partner’s interest in the
partnership immediately before the distribution. If there were a
loss realized upon the distribution by Kildare Timmy to Mr.
Ramsburg of the horses, stud rights, and bank account balance in
question, sec. 731(a)(2) provides that loss is not to be recog-
nized except that, upon a distribution in liquidation of a
partner’s interest in a partnership, where no property is dis-
tributed other than money, unrealized receivables as defined in
sec. 751(c), and inventory as defined in sec. 751(d), loss is to
be recognized to the extent of the excess of the adjusted basis
of the partner’s interest in the partnership over the sum of
(1) any money distributed and (2) the basis to the distributee,
as determined under sec. 732, of any such unrealized receivables
and any such inventory. In this connection, for purposes of sec.
731(a)(2), each of Kildare Timmy’s racing and breeding horses and
its stud rights may constitute an unrealized receivable as
defined in sec. 751(c), but only to the extent of the amount to
be treated as gain to which sec. 1245(a) would apply if at the
time Kildare Timmy distributed each such asset to Mr. Ramsburg,
that partnership had sold each such asset at its fair market
value. See secs. 731(a)(2)(B), 751(c). Thus, for purposes of
sec. 731(a)(2), any determination of whether Kildare Timmy
distributed “unrealized receivables” to Mr. Ramsburg depends on
Kildare Timmy’s basis in and the fair market value of each such
horse and stud rights. Even if there were any sec. 1245(a) gain
associated with any of Kildare Timmy’s horses or stud rights,
none of any loss realized by Mr. Ramsburg upon the distribution
to him by Kildare Timmy of the horses, stud rights, and bank
account balance in question would be recognized under sec.
731(a)(2). That is because a distribution of an unrealized
receivable in the form of sec. 1245(a) gain necessarily involves
the distribution of the underlying asset (i.e., each of the
horses and the stud rights in question) to which the sec. 1245(a)
gain attaches. Therefore, the distribution in liquidation of Mr.
(continued...)
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