Roberto is a partner in a continuing partnership.At the end of the current year, the partnership distributed to Roberto in a proportionate, nonliquidating distribution cash of $50,000, inventory with a basis to the partnership of $45,000 and a fair market value of $60,000, and a parcel of land with a basis to the partnership of $120,000 and a fair market value of $80,000.Roberto's basis in the partnership interest was $240,000 before the distribution.What basis does Roberto take in the inventory and land, and what is his basis in the partnership interest following the distribution?
A)$45,000 basis in inventory; $80,000 basis in land; $65,000 basis in partnership.
B)$45,000 basis in inventory; $120,000 basis in land; $25,000 basis in partnership.
C)$60,000 basis in inventory; $80,000 basis in land; $50,000 basis in partnership.
D)$60,000 basis in inventory; $120,000 basis in land; $10,000 basis in partnership.
E)$60,000 basis in inventory; $120,000 basis in land; $0 basis in partnership.

Question

Quizplus · Accepted Answer

In a nonliquidating distribution, the partner's basis in distributed property is generally its basis to the partnership immediately before the distribution.
Roberto's basis in the inventory is $45,000 (its basis to the partnership) and his basis in the land is $120,000 (its basis to the partnership). 
To determine Roberto's basis in the partnership interest following the distribution, we subtract the sum of the cash and the basis in the distributed property from Roberto's pre-distribution basis. 
$240,000 - ($50,000 + $45,000 + $120,000) = $25,000. 
Therefore, Roberto's basis in the partnership interest following the distribution is $25,000.

Roberto Is a Partner in a Continuing Partnership