Jacob is a partner in the JB Partnership with a basis in his partnership interest is $35,000.He receives a nonliquidating distribution of $25,000 cash and real property with a partnership basis of $18,000 and a fair market value of $30,000.How much taxable gain will Jacob recognize on the distribution?
A)0
B)$8,000
C)$20,000
D)$43,000

Question

Quizplus · Accepted Answer

In a nonliquidating distribution, a partner recognizes no gain unless the cash received exceeds the partner's basis in the partnership interest. Here, Jacob's basis in his partnership interest is $35,000, and he receives $25,000 in cash and property with a partnership basis of $18,000 (totaling $43,000 in distribution). However, for the purpose of recognizing gain, only the cash received is considered, which does not exceed his original basis. Therefore, Jacob recognizes no gain.

Jacob Is a Partner in the JB Partnership with a Basis