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Example of nonliquidating distribution

Statement of cash flows reports only those operating, investing and financing activities that affect cash or cash equivalents.

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Partners, however, can only take a loss on their returns if it's solely the result of a liquidating distribution of cash, outstanding partnership receivables or inventory items.

If the partnership distributes property -- anything other than cash and property treated as cash -- during its liquidation, it has no immediate tax effect.

Therefore, both IFRS and US GAAP require companies to disclose all significant non-cash investing and financing activities either at the bottom of the statement of cash flows as a footnote or in the notes to the financial statements.

Some examples of non-cash investing and financing activities that may become significant for the users of financial statements are given below: The general approach is to disclose a schedule of non-cash investing and financing activities at the bottom of the statement of cash flows.

They also include provisions on the timing of basis adjustments, basis computations during a loss year, computation of individual stock basis and the categorization of debt as basis.

The consequences of distributions to the shareholders and the corporation are discussed further.

Madison must recognize a $10,000 gain (all ordinary income).