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Partnership liquidating distributions property

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754 election to step up the basis of the assets under Secs. However, once the partnership makes the election, it stays in effect for any subsequent sale until the partnership requests the election to be rescinded.

If the transaction is structured as an installment sale, the outside basis of the partnership interest is prorated and applied against each payment.Also, if a subsequent buyout of a partnership interest is below FMV, then the step-down rules must also apply under this election.The benefit of this election is that the acquiring partners are allowed to take additional deductions as the assets that generated the step-up are disposed of or depreciated.The partnership may use its assets to liquidate the partner's interest, or it can take on debt to liquidate the partner's interest.The remaining partners cannot fund the liquidation, nor may these partners make the liquidating payments on behalf of the partnership.Under the purchase scenario, one or more remaining partners may buy out the terminating partner's interest for fair market value (FMV) plus any relief of debt realized by the partner.