In a proportionate liquidating distribution in which the partnership is also liquidated, Ralph received cash of $30,000, accounts receivable (basis of $0, fair market value of $20,000), and equipment (basis of $0, fair market value of $10,000).Immediately before the distribution, Ralph's basis in the partnership interest was $40,000.Ralph realizes and recognizes a loss of $10,000, and his basis is $0 in both the accounts receivable and the equipment.

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In a liquidating distribution, Ralph's basis in the partnership interest is first reduced by the cash received. The remaining basis is then allocated to the non-cash assets received, which means Ralph would not recognize a loss, and his basis in the accounts receivable and equipment would not be $0.

In a Proportionate Liquidating Distribution in Which the Partnership Is