In a proportionate nonliquidating distribution of cash and a capital asset, the partner recognizes gain to the extent the amount of cash plus the fair market value of property distributed exceeds the partner's basis in the partnership interest.

Question

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In a proportionate nonliquidating distribution, a partner recognizes gain only if the cash distributed exceeds the partner's basis in the partnership interest. The fair market value of the property does not trigger gain recognition.

In a Proportionate Nonliquidating Distribution of Cash and a Capital