Tom and William are equal partners in the TW Partnership. Just before TW liquidated, Tom's capital account balance was $50,000 and William's capital account balance was $30,000. To meet the substantial economic effect requirements, any liquidating cash distribution must be allocated in proportion to those ending capital account balances.

Question

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The substantial economic effect requirements necessitate that liquidating distributions be made in accordance with the partners' capital account balances, thus in this case, distributions should be allocated based on Tom's $50,000 and William's $30,000 capital account balances.

Tom and William Are Equal Partners in the TW Partnership