You raised an important point, if there are over $600,000 in profits during this 90 days, then the distribution would make sense on its own. Part of the issue is that the IRS needs to prove intent and this can be easier or more difficult. If the partnership has a loss, this looks more like a disguised sale. Could selling the property to the partnership first for $250,000 followed by a $250,000 cash purchase of the 25% interest (when this is in line with prior sales of partnership interests) solve this problem? You raised an important point, if there are over $600,000 in profits during this 90 days, then the distribution would make sense on its own. Part of the issue is that the IRS needs to prove intent and this can be easier or more difficult. If the partnership has a loss, this looks more like a disguised sale. Could selling the property to the partnership first for $250,000 followed by a $250,000 cash purchase of the 25% interest (when this is in line with prior sales of partnership interests) solve this