Need Cash Now? Current (Non-liquidating) Distributions from Partnerships

Current distributions, also known as non-liquidating distributions, are critical to a partnership's or limited liability company’s (LLC) operations since pass-through entities use current distributions to distribute earnings and other property to the entity's partners or members in the normal course of business. From a partnership tax accounting perspective, current distributions are important since they are integral in determining a partner's basis in its partnership interest. 

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Related Content

• Advanced Taxation Issues for Partnerships and LLCs
  Learn more about the operations of a partnership. A partnership's capital accounts reflect the financial relationship among the partners, which is the current status of the business and economic deal agreed to by the partners and incorporated into the partnership agreement. A partner's basis in its partnership interest is the partner's "outside basis." The partnership's basis in its assets is the "inside basis."  

• Partnership and Other Pass-Through Entities Taxation Resource Kit
  Reference the content in this resource kit for a greater understanding of the issues related to the taxation of pass-through business entities such as partnerships, LLCs, and S corporations.

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•  Tax Key Legal Developments Tracker (Federal)—keep up to date with key legal developments!
  • Business Entities. IRS provides a limited waiver of the addition to tax under R.C. § 6655for the underpayment of estimated income tax by a corporation to the extent the amount of any underpayment is attributable to the corporation’s corporate alternative minimum tax (CAMT) liability under I.R.C. § 55, as amended by the Inflation Reduction Act of 2022. Notice 2024-47.
  • Business Entities. Treasury issues final regulations concerning the statutory disallowance rule enacted by the SECURE 2.0 Act of 2022 for a qualified conservation contribution made by a partnership or an S corporation after December 29, 2022. 89 Fed. Reg. 54284 (June 28, 2024).
  • Business Entities. IRS advises taxpayers of its position challenging certain partnership related-party transactions under the codified economic substance doctrine in I.R.C. § 7701(o). Specifically, IRS addresses the question: "Does the economic substance doctrine apply to disallow tax benefits associated with a series of transactions involving a related-party partnership, through which the parties first generate a disparity between inside basis and outside basis and then trigger a basis adjustment to property under I.R.C. § 732(b), § 734(b), or § 743(b), and increased cost recovery deductions with respect to the property or reduced gain (or increased loss) upon a sale of the property?" Rev. Rul. 2024-14.
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