Before receiving a liquidating distribution,Kathy's basis in her interest in the KLM Partnership is $30,000.The distribution consists of $5,000 in money,inventory having a $1,000 basis to the partnership and a $2,000 FMV,and two parcels of undeveloped land (not held as inventory)having basis of $3,000 and $9,000 to the partnership with FMVs of $5,000 and $12,000,respectively.What is Kathy's basis in each parcel of land?

Question

Quizplus · Accepted Answer

The total FMV of the two parcels of land is $17,000 (5,000 + 12,000). The percentage of the total distribution that this represents is 56.67% (17,000 / 30,000). Therefore, 56.67% of the $12,000 basis in the more valuable parcel is allocated to that parcel, which is $6,800 (0.5667 x 12,000). Kathy's new basis in that parcel is $6,800. Similarly, 56.67% of the $3,000 basis in the less valuable parcel is allocated to that parcel, which is $1,700 (0.5667 x 3,000). Kathy's new basis in that parcel is $1,700.

Before Receiving a Liquidating Distribution,Kathy's Basis in Her Interest in the KLM