Charlie receives a proportionate, nonliquidating distribution from the Forest Partnership.The distribution consists of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $68,000.Immediately before the distribution, Charlie's adjusted basis for her partnership interest is $85,000.Charlie's basis in the noncash property received is:
A)$20,000.
B)$40,000.
C)$65,000.
D)$68,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Charlie's basis in the noncash property received is the lesser of the partnership's adjusted basis in the property ($40,000) or her remaining basis in the partnership interest after the cash distribution ($85,000 - $20,000 = $65,000). Therefore, her basis in the property is $40,000.

Charlie Receives a Proportionate, Nonliquidating Distribution from the Forest Partnership