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Distributions from a partnership are generally treated as a reduction of the basis of the partner's partnership interest. This means that when a partner receives a distribution, it does not count as taxable income to the partner at the time of the distribution. Instead, the distribution reduces the partner's basis in their partnership interest.

When a partner has a basis in the partnership and receives a distribution, this amount is subtracted from their basis. If the distribution exceeds the basis in the partnership interest, the excess amount may then be treated as taxable income. This mechanism allows the partner to receive distributions without immediate tax implications, as long as it does not exceed their investment in the partnership.

This treatment reflects the underlying principle that partnerships are pass-through entities, meaning that income, deductions, and other tax attributes flow through to the partners, and the timing of taxation can depend on the partner’s basis in the partnership rather than the mere occurrence of a distribution.