In general, no gain is incurred by a partner on liquidation of a partnership except to the extent money distributed exceeds the income tax basis of the partner’s partnership interest and except for amounts received attributed to unrealized receivables and inventory.1 Whenever “unrealized receivables” and “inventory items” are involved, those amounts produce ordinary income.2 That rule applies also to sales of partnership interests to outsiders as well as sales to one or more of the partners.3 A major question, for farm and ranch partnerships, is what is meant by “unrealized receivables” and “inventory items”?4