How much gain or loss must Damon recognize

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Problem - Damon owns a 20% interest as a general partner in the Vermillion Partnership, which provides consulting services. The partnership distributes $60,000 cash to Damon in complete liquidation of his partnership interest. Damon's share of partnership unrealized receivables immediately before the distribution is $20,000. The partnership has no other hot assets. Assume that none of the cash payment is for goodwill. Damon's basis for his partnership interest immediately before the distribution is $30,000.

Required -

a. How is the cash payment treated under § 736?

b. How much gain or loss must Damon recognize on the distribution? What is the character of these amounts?

c. How does the partnership treat the distribution to Damon?

d. What planning opportunities might the partnership want to consider?

e. How would your answers to parts (a), (b), and (c) change if Damon had been a limited partner?

Reference no: EM132648487

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