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  • videocam On-Demand
  • signal_cellular_alt Intermediate
  • card_travel Tax Law
  • schedule 90 minutes

Tax Treatment of LLC Liquidating Distributions: Income and Deduction Rules, Basis, Tax Distributions, Reporting

Exceptions to General Nonrecognition Rule, Members' Tax Basis in Property, Depreciating Property, Holding Period for Assets, and More

$347.00

This course is $0 with these passes:

CLE
ALL
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Description

The termination of LLCs classified as partnerships involves distributing all of the LLC's assets to its members in the liquidation of their interests. Tax professionals must identify potential tax implications of liquidating distributions and implement planning strategies to minimize adverse tax consequences.

Generally, current tax rules for distributions apply both to distributions that liquidate a member's interests upon termination of the LLC as well as those made with the LLC maintaining its existence. Depending on the manner and circumstances of the distribution, certain payments may be classified as Sec. 736(a) payments and treated as guaranteed payments or distributive shares of LLC income, while other liquidating distributions are taxed under Sections. 731 and 732. Section 736(a) has an important impact on professional partnerships.

Under Sec. 731(a), members of an LLC classified as a partnership for tax purposes do not recognize taxable gain or loss on a distribution unless the distribution exceeds their outside basis in the LLC interest. The same applies under Sec. 731(b) whereas the LLC does not recognize taxable gain or loss on distributions made to members. However, both provisions are subject to certain exceptions that tax professionals must understand along with the potential implications regarding tax basis under Sec. 732.

In addition, a number of other key issues must also be considered in order to minimize tax liability, such as understanding (1) a member's tax basis when property is received in liquidation; (2) the impact of depreciating property received in a liquidating distribution; (3) suspended losses when an LLC distributes assets to a member in a liquidating distribution; and (4) potential legal implications under state law.

Listen as our panel discusses key factors in determining the taxability of liquidating distributions of cash and property, exceptions to the general nonrecognition rules, the tax basis in property received in liquidation, the holding period for distributed assets, and other important issues regarding the taxation of LLC liquidating distributions.

Presented By

Robert S. Barnett
Founding Partner
Capell Barnett Matalon & Schoenfeld, LLP

Mr. Barnett’s practice is highly concentrated in the areas of taxation, trusts, estates, corporate and partnership law and charitable planning.  His experience includes surrogate’s court practice, tax dispute resolution in both federal and state jurisdictions, and tax court representation.  Mr. Barnett frequently assists clients in structuring financial transactions and charitable gifts.  His articles and lectures encompass a wide variety of topics, including business succession, estate planning, generation-skipping, stock options, effective strategies for removing tax liens, proper utilization of the marital deduction and utilization of partnership elections.

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Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.


  • Live Online


    On Demand

Date + Time

  • event

    Wednesday, September 17, 2025

  • schedule

    1:00 p.m. ET./10:00 a.m. PT

I. Tax rules applicable to liquidating distributions

II. Navigating exceptions to the nonrecognition rules

III. Tax issues for liquidating distributions of cash

IV. Tax challenges for liquidating distributions of property

V. Determining tax basis

VI. Best practices for counsel and taxpayers to minimize tax liability

The panel will discuss these and other key issues:

  • Tax treatment of the distribution to the LLC and any members
  • General nonrecognition rules and exceptions
  • Potential tax implications of liquidating distributions of cash and property
  • Determining tax basis
  • Impact of depreciating property received in a liquidating distribution
  • Best practices for counsel and taxpayers to minimize tax liability