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Before you can figure out the tax effects of the liquidation, you'll need to know your adjusted tax basis in the partnership.
Initially, your basis is equal to the amount of cash plus your basis -- or cost -- in any property contributed to the business.
The estimate of future liquidating distributions includes projections of revenues to be earned and costs and expenses to be incurred during the period required to complete the plan of liquidation.
There is inherent uncertainty with these projections and, accordingly, the projections could change materially based on a number of factors both within and outside of the Company’s control including market conditions, the performance of the underlying property asset, the timing of sale and any changes in the underlying assumptions of projected cash flows.
The current estimate of net assets in liquidation as of March 31, 2019 has been estimated based on undiscounted cash flow projections and assumes a final liquidation on March 31, 2020.
A loss results when the liquidating distribution is less than the partner's basis in the partnership.Partners, however, can only take a loss on their returns if it's solely the result of a liquidating distribution of cash, outstanding partnership receivables or inventory items.If the partnership distributes property -- anything other than cash and property treated as cash -- during its liquidation, it has no immediate tax effect.As a result, the tax effects of a partnership that makes liquidating distributions only impacts the partners who receive them.To be taxed as a liquidating distribution, however, a partner's interest in the partnership must terminate.