The partnership making an operating distribution will recognize gain or loss only when the partner that receives the distribution recognizes gain or loss. Jerry has a basis in his partnership interest of $50,000 when the partnership makes a current distribution to him of two pieces of land, each valued at $30,000. The basis in Land A is $40,000 and the basis in Land B is $20,000. Jerry allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B. A disproportionate distribution of hot assets is treated as though the partnership distributes a proportionate share of hot assets to the partner and then the partner sells those hot assets back to the partnership at fair market value in exchange for a portion of the assets actually received in the distribution