Today, the Treasury and IRS issued proposed regulations under Section 751(b) that prescribe how a partner should measure its interest in a partnership’s unrealized receivables and inventory items.  The proposed regulations also provide guidance regarding the tax consequences of a distribution that causes a reduction in that interest.  The proposed regulations adopt many of the principles described in Notice 2006-14, including a hypothetical sale approach to measuring a partner’s interest in Section 751 property for the purpose of determining whether a distribution reduces a partner’s interest in the property.