No. The distributions will be reflected on the K-1's line 19 with the appropriate code (A or C).
As @Mike9241 noted, you will take what is known as a substituted basis in the assets distributed in liquidation.
- Your outside tax basis will be updated for your final K-1 applicable lines (except for line 19C)
- You will then allocate the remaining outside tax basis amongst the assets distributed
- There are specific rules on how this allocation works
- This starts with a carryover basis in the property
- If there is either excess or insufficient tax basis to allocate, then the rules get more involved
- The rules are governed by Section 732
- Google regulation 1.732-1 for the provisions. For some reason my copy and paste isn't working. Very annoying.
- You will also step into any depreciation recapture upon the sale of any of the assets distributed
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
