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The value of marketable securities, such as stock investments that are traded on a public stock exchange, and decreases to your share of the partnership's debt are both treated as cash distributions.When the total amount of cash distributed is more than a partner's basis in her partnership interest, the difference in the two amounts is a gain.As LLCs increase in popularity, CPAs are confronted with complex tax issues, particularly when ownership of the LLC changes.The IRS issued revenue rulings 99-5 and 99-6 to address issues surrounding the conversion of a single-member LLC to a multiple-member LLC and the conversion of a multiple-member LLC to a single owner entity.The primary difference between C corporations and S corporations is that C corporations are taxed twice on earned income: : once at the corporate level when the income is earned, and again at the shareholder level when the income is distributed.The rules governing distributions from C corporations differ from the rules that apply to distributions from S corporations.Any amount in excess of the shareholder's stock basis is capital gain (Secs. The amount of the distribution is decreased (but not below zero) by liabilities assumed by the shareholder (e.g., a mortgage on a distributed piece of real estate).

If the corporation distributes appreciated property, the corporation is taxed on the gain under Code § 311(b).Professionals (doctors, lawyers, accountants and engineers) as well as software and computer-based companies and a wide array of other small businesses are increasingly using this form of organization.LLCs offer owners—generally known as members—the liability protection of a corporation and the tax structure of a partnership.Shareholders recognize a taxable dividend to the extent a distribution is paid out of corporate earnings and profits (E&P).If the distribution exceeds E&P, the excess reduces the shareholder's stock basis.