Capital gain from liquidating dividends

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No gain is recognized from a distribution of cash or marketable securities that can easily be converted to cash, unless the distribution is more than the partner's outside basis, in which case, the excess is taxable as a capital gain.

Capital Gain = Cash Distribution – Partner's Outside Basis Distributions are generally made throughout the year, but they are taken into account on the last day of the partnership's tax year.

The property basis that remains after subtracting the outside basis is taxable as a gain. If distributed property also had a secured liability, then the partner assumes the liability which decreases her share of the partnership's liabilities.The other partners' share of liabilities is also decreased by the deemed distribution.If any part of the distribution is greater than a partner's basis in the partnership, then the excess is treated as a capital gain.Mutual funds and Exchange Traded Funds are subject to market risk and volatility. For more information about the risks associated with each fund, go to its detailed fund information page or read the prospectus.Whether earnings are retained in a partnership or distributed to partners has no affect on the taxation of those earnings, since the partners have to pay tax on the earnings whether they are distributed or not.

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