• When non-liquidating assets are transferred to another partner by a partnership, tax rules are followed to determine the gain.
• When a partnership distributes property (other than money) to a partner, there is typically no recognition of gain or loss for it. Receiving the property does not lead the partner to recognize any gain.
• If there is a distribution of money that goes beyond the partner's adjusted basis in the partnership, the partner must recognize a gain equal to the excess.
• In most cases, the partner's basis in the distributed property is identical to the partnership's adjusted basis in the property. Before distribution, the partner's adjusted basis in the partnership interest cannot exceed the maximum amount.
• The partner's partnership interest is diminished due to both the amount of money and the adjusted basis of the property distributed.

Here's an instance for your explanation:

• 'D' contributed land for the exchange of 25% of their partnership interest in 'P-Company'.
• The fair market value of the land at the time of contribution was $40,000, but the adjusted basis was $25,000.
• P-Company later distributed land to D at a Fair Market Value of $50,000.
• What is the gain 'D' recognized from this transaction?

Answer : Partner D's contribution of property to the 'P-company' will result in no gain being recognized due to the rules set by the Internal Revenue Service.

• It is customary for no gain to be recognized when property is distributed from a partnership.
• If property is distributed, the remaining gain can be recognized, but the rule does not apply if a partner receives the property from the same partner who contributed. The rule is not applicable when a partner receives the property they contributed.
• The land that contributed to the partnership will not result in any gain for 'Partner D'.