When Char's outside basis in the Toleffson Partnership is $704,000, the partnership distributes to her $122,000 of cash, a package of accounts receivable (fair market value of $250,000, inside basis to the partnership of $0), and a parcel of land (fair market value of $655,000, inside basis to the partnership of $680,000). Char remains a partner in the partnership, and the distribution is proportionate to the partners.

A partnership recognizes no gain or no loss on a distribution that does not alter the partner's proportionate ownership of hot assets.

Char recognizes no gain or loss on the distribution. Because Gain is recognized on a non-liquidating distribution if the amount of cash or certain marketable securities received exceeds the partner's outside basis immediately before the distribution.

The cash is deemed to be distributed first and reduces Char's outside basis to $582,000. Next the accounts Receivable is distributed and takes a substituted and carryover basis of $0. Then the land is distributed last and takes a substituted basis of $582,000. The receivable distribution does not change Char's outside basis. The value she was received $1,027,000 ($122,000 cash + $250,000 account receivable + $655,000 land) (compared to her basis of $704,000), but she recognizes no gain or loss because of the basis allocation and ordering