Lori, a partner in the JKL partnership, received a proportionate current (nonliquidating) distribution of $10,000 cash, unrealized receivables with a basis of $0 and a fair market value of $15,000, and land with a basis of $6,000 and a fair market value of $10,000. Her basis in the partnership interest immediately before the distributions was $14,000. She will recognize $0 gain on the distribution, and her basis in the receivables and land will be $0 and $4,000, respectively.

Question

Quizplus · Accepted Answer

Lori's basis in the partnership interest immediately before the distributions was $14,000. The total fair market value of the assets she received is $25,000 ($10,000 cash + $15,000 receivables + $10,000 land). Since the fair market value of the assets she received is greater than her basis in the partnership interest, she will recognize a gain on the distribution.

Lori, a Partner in the JKL Partnership, Received a Proportionate