Connie owns a one-third capital and profits interest in the calendar year CAB Partnership. Her adjusted basis for her partnership interest was $120,000 when she received a proportionate current (nonliquidating) distribution of the following assets.
Partnership’s Basis in Asset
Asset’s Fair Market Value
CashLand held for investment$140,000 30,000
$140,000
60,000
?
a.Calculate Connie’s recognized gain or loss on the distribution if any. b.Calculate Connie’s basis in the land received. c.Calculate Connie’s basis for her partnership interest after the distribution.
What will be an ideal response?
| a. | $20,000 gain. Connie recognizes a gain of $20,000 on the distribution, which is the amount by which the $140,000 cash distribution exceeds her $120,000 outside basis. |
| b. | $0 basis in land. The cash distribution reduces Connie’s basis to $0. When the land is distributed, it takes the lesser of a carryover basis of $30,000 or Connie’s remaining basis of $0. |
| c. | $0 basis in partnership interest. Because Connie has no remaining basis for her partnership interest after the cash distribution, her outside basis is $0. |
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