Shelby, a partner in the STU partnership, received a proportionate nonliquidating distribution of $50,000 cash, unrealized receivables with a basis of $0 and a fair market value of $40,000, and land with a basis of $35,000 and a fair market value of $25,000. Her basis in the partnership interest immediately before the distributions was $70,000. She will recognize $0 gain on the distribution, and her basis in the receivables and land will be $0 and $20,000 respectively.

Question

Quizplus · Accepted Answer

In a nonliquidating distribution, a partner generally recognizes no gain. Shelby's basis in the partnership interest is reduced by the cash received first, then by the basis of the property received. Her basis in the receivables is $0, and the remaining basis is allocated to the land, resulting in a $20,000 basis for the land.

Shelby, a Partner in the STU Partnership, Received a Proportionate