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While both entities provide owners with protection from liability, a corporation and its shareholders generally must both recognize gain or loss on liquidation. 731(a)(1) when a member receives marketable securities that are treated as money in excess of the member's basis in his or her LLC interest (see Sec. In addition, gain may be recognized if (1) distributions of Sec.
This excess basis is subject to the depreciation rules, lives, and methods in effect at the time of the distribution (Sec. Holding Period for Distributed Assets A member's holding period for property received in a nontaxable distribution includes the holding period of the LLC (Secs. This rule applies whether the member receives the property in a current distribution or a liquidating Suspended Losses If an LLC distributes assets to a member in a liquidating distribution and those assets have been used in a passive activity, the member continues to carry over any suspended passive activity losses (PALs) with respect to that activity.
The LLC has no unrealized receivables or appreciated inventory, so Sec. The LLC acquired the real property by R recognizes no gain or loss on the liquidation.
R first reduces his ,000 outside basis by the ,000 cash distribution.
751(b)); (2) property that had an FMV different from basis on the date of contribution is distributed to a member other than the contributing member within seven years of contribution (see Sec.
704(c)(1)(B)); (3) the distribution is within seven years after a contribution of appreciated property (see Sec. He has never contributed property other than cash to the LLC.
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Always stay clear of products that have a limited shelf life, or that have special warehousing and transportation requirements.