If the distribution is a liquidating distribution, the distributee member takes a basis in distributed property equal to the distributee member’s outside basis.
Assume alternatively that Marali LLC distributes both Stonecrest Building and Stonehenge Building to Sarah in complete liquidation of her interest in Marali LLC.
First, a member generally recognizes gain if the tax partnership distributes money or marketable securities to a member and the amount of the money or the fair market value of the securities exceeds the member’s outside basis.
A member can recognize loss on a cash liquidating distribution if the cash distribution is less than the member’s outside basis.
At the time of contribution, Worn Warehouse was worth 0,000 and Sabeel had a 0,000 basis in it.
Sabeel takes a 0,000 outside basis in his 41 percent interest in Saio LLC, and Fabio takes a 0,000 outside basis in his 59 percent interest in Saio LLC. At the time of contribution, Worn Warehouse had a 0,000 built-in gain (0,000 fair market value minus 0,000 basis).