Last year,Miguel contributed nondepreciable property with a basis of $50,000 and a fair market value of $75,000 to the Starling Partnership in exchange for a 25% interest in the partnership.In the current year,he receives a nonliquidating distribution from the partnership of other property with a basis to the partnership of $40,000 and a fair market value of $52,000.The basis in his partnership interest at the time of the distribution was $60,000.How much gain or loss does Miguel recognize on the distribution? (Assume no other distributions have been made to Miguel,the property he originally contributed is still owned by the partnership,and this is not a disguised sale transaction. )
A)$0 gain or loss.
B)$2,000 loss.
C)$6,000 gain.
D)$8,000 gain.
E)$10,000 gain.

Question

Quizplus · Accepted Answer

Miguel recognizes no gain or loss on the nonliquidating distribution because the distribution does not exceed his basis in the partnership interest. The basis of the distributed property is subtracted from his partnership interest basis, but no gain or loss is recognized.

Last Year,Miguel Contributed Nondepreciable Property with a Basis of $50,000