Proportionate nonliquidating distribution
It includes all assets that are not cash, capital, or § 1231 assets.Substantially appreciated inventory is inventory that has a fair market value in excess of 120 percent of the partnership’s adjusted basis for the inventory.
,45 Stephanie receives a proportionate nonliquidating distribution from the QRS Partnership.
If the partnership makes an , the inside basis of the partnership property can be adjusted to reflect the purchase price paid by the partner.
If the election is not made, the statute produces some inequitable results.
This second type of liquidating distribution occurs, for example, when a partner retires from a partnership, or when a deceased partner’s interest is liquidated.
The two types of liquidating distributions receive differing tax treatment, as later sections of the chapter will explain.