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was $837,481, computed as $3,445,506 x 99% x 99% x 24.8%.
B. Curtis’s basis in his interest in Countryside immediately before the 12/26/00 distribution
$3,798,080 Curtis’s basis as of 1/1/00
3,961,443 Net increase in Curtis’s share of liabilities. See (1) below.
(21,482) Money distributed to Curtis. See (2) below.
22,854 Curtis’s share of Countryside’s income. See (3) below.
7,760,895 Curtis’s basis in his Countryside interest immediately before the 12/26/00 distribution
(1) As calculated in II.A., Curtis’s share of Countryside liabilities increased
from $4,402,714 as of 1/1/00 to $8,364,157 immediately before the 12/26/00 distribution,
a net increase of $3,961,443.
(2) Curtis received a distribution during that period of $21,482 in money per Schedule K-1.
(3) Curtis’s share of taxable income/(loss) for that period was ($22,854) per Schedule K-1.
III. Effect of distribution to Curtis in redemption of his interest in Countryside
A. The 12/26/00 distribution to Curtis in redemption of his interest in Countryside reduced Curtis’s share of
liabilities as follows:
$8,364,157 Curtis’s total share of liabilities, before the 12/26/00 redemption
(890,967) Curtis’s continued liability. See (1) and (2) below.
7,473,190 Net decrease in Curtis’s share of liabilities
(1) Under sec. 1.752-1(f), Income Tax Regs., only the net decrease in a partner’s share
of liabilities is treated as a distribution of money to the partner.
(2) Countryside distributed a 26.12-percent interest in CLPP to Curtis in redemption of
his interest in Countryside. As a result, Curtis was relieved of his $8,364,157 share
of Countryside liabilities, but Curtis retained a liability representing his share of
CLPP’s share of MP’s liabilities. Curtis’s share of these liabilities was $890,967,
computed as $3,445,506 x 99% x 26.12%. Thus, the net decrease in Curtis’s share of
liabilities was $7,473,190.
B. Because the $7,473,190 decrease in liabilities was less than Curtis’s $7,760,895 basis in his interest in
Countryside, Curtis recognized no gain on the distribution in redemption. See (1) below.
(1) Under sec. 731(a), no gain is recognized upon a distribution to a partner except
to the extent that any money distributed exceeds the adjusted basis of such partner’s
interest in the partnership immediately before the distribution.
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Last modified: March 27, 2008