Partnership distributions — EA Part 2 Widgets

What this does

How to read it Visual: before/after basis bars and the gain spike when money overshoots.

Model money vs property distributions. Partner gain under §731 generally appears only when money exceeds basis — property FMV usually does not create gain.

Visual: before/after basis bars and the gain spike when money overshoots.

Scenario

Partner outside basis (before distribution) Money distributed (cash + mkt securities as money) Other property — partnership adjusted basis Other property — FMV (distractor) Only money / UR / inventory? (loss test)

Results

Money vs basis—

FMV distractor (not used for §731 gain)—

Gain recognized

—

Loss recognized

—

Partner basis in property

—

Ending outside basis

—

Basis before → after · gain spotlight

Exam trap: Property FMV almost never creates partner gain under §731 — only money in excess of basis. Nonliquidating: no loss. Liquidating loss only if solely money/UR/inventory and basis exceeds money + AB of those items.

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Study tool only — not official IRS software. Figures labeled 2025 track law/forms through Dec 31, 2025. Confirm against current IRS pubs before the exam.