Liquidating distribution capital gain
Assume that an investor owns 2,000 shares of a mutual fund that has five million total shares outstanding.During the year, the mutual fund realized million in total capital gains from the sale of stock positions in its portfolio.Each partner has a tax basis in the partnership, determined by the amount of after-tax value he’s contributed to the partnership.When the partnership liquidates, the partner can recover his entire basis tax-free. were distributed among its three shareholders in such manner as to make the totality of its distributions pro rata. , except that 100% of Whiteacre was distributed to C and the remaining assets of X Co. You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund.
distributed a 60% interest in Whiteacre to A, a 20% interest in Whiteacre to B, and a 20% interest in Whiteacre to C. also were distributed pro rata among X Co.'s shareholders.
Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose.
For more information about the tax on unearned income of children and the parents' election, see chapter 31. Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income.
Liquidating a partnership results in a gain or loss depending on how each partner’s distribution compares to his basis.
If the distribution exceeds his basis, he recognizes a gain.