A partnership distribution is not taken into account in determining the partner's distributive share of partnership income or loss.
If any gain or loss from the distribution is recognized by the partner, it must be reported on his or her return for the tax year in which the distribution is received.
To view this Portfolio, take a free trial to Bloomberg BNA Tax & Accounting This Portfolio is available with a subscription to Bloomberg BNA Tax & Accounting, a comprehensive research solution including over 500 Tax Management Portfolios, practice tools, primary sources and timely news. 716-2nd, Partnerships — Current and Liquidating Distributions; Death or Retirement of a Partner, provides a detailed discussion of the tax consequences of distributions by partnerships to partners, including those arising from distributions of a partner's share of the results of partnership operations, and other distributions by the partnership that do not result in termination of the distributee's interest in the partnership even though accompanied by a change in the distributee's and remaining partners' shares of capital or profits and losses, whether in money or property — all called current distributions — and distributions of money or property on the withdrawal of a partner whether on death or withdrawal — called liquidating distributions.
If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate.
Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met.
Liquidating distributions may be accompanied by other retirement payments that do not represent consideration for the withdrawing partner's interest in partnership property, and may be deferred compensation, or other claims against past or future partnership income. Distribution of Property Subject to a 743(b) Basis Adjustment D.
When the withdrawal is a result of death, there may be other collateral income and transfer tax consequences. Allocation of Section 734(b) Adjustment Among Partnership Assets a.