Liquidating trust and capital gain and tax

Posted by / 25-Nov-2019 13:44

Liquidating trust and capital gain and tax

Initially, your basis is equal to the amount of cash plus your basis -- or cost -- in any property contributed to the business.Your basis increases and decreases over the years for required adjustments to arrive at adjusted basis -- the amount you'll use to calculate gain or loss after the liquidation.

This view was supported in the case of Stevenson v Wishart and Others (59 TC 740).If your basis is zero, this means the amount you eventually sell the property for is all taxable gain.Before you can figure out the tax effects of the liquidation, you'll need to know your adjusted tax basis in the partnership.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.

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