Atiqa receives a nonliquidating distribution of land from her partnership.The partnership purchased the land five years ago for $20,000.At the time of the distribution,it is worth $28,000.Prior to the distribution,Atiqa's basis in her partnership interest is $37,000.Due to the distribution,Atiqa and the partnership will recognize income of
A) $$\begin{array} { | l | l | }
\hline \text { Atiqa } & \text { Partnership } \
\hline \$ 28,000 & \$ 8,000\\hline
\end{array}$$
B) $$\begin{array} { | l | l | }
\hline \text { Atiqa } & \text { Partnership } \
\hline \$ 8,000 & \$ 0 \
\hline
\end{array}$$
C) $$\begin{array} { | l | l | }
\hline \text { Atiqa } & \text { Partnership } \
\hline \$ 0 & \$ 0 \
\hline
\end{array}$$
D) $$\begin{array} { | l | l | }
\hline \text { Atiqa } & \text { Partnership } \
\hline \$ 0 & \$ 8,000 \
\hline
\end{array}$$

Question

Atiqa receives a nonliquidating distribution of land from her partnership.The partnership purchased the land five years ago for $20,000.At the time of the distribution,it is worth $28,000.Prior to the distribution,Atiqa's basis in her partnership interest is $37,000.Due to the distribution,Atiqa and the partnership will recognize income of
A) $$\begin{array} { | l | l | } 
\hline \text { Atiqa } & \text { Partnership } \
\hline \$ 28,000 & \$ 8,000\\hline
\end{array}$$
B) $$\begin{array} { | l | l | } 
\hline \text { Atiqa } & \text { Partnership } \
\hline \$ 8,000 & \$ 0 \
\hline
\end{array}$$
C) $$\begin{array} { | l | l | } 
\hline \text { Atiqa } & \text { Partnership } \
\hline \$ 0 & \$ 0 \
\hline
\end{array}$$
D) $$\begin{array} { | l | l | } 
\hline \text { Atiqa } & \text { Partnership } \
\hline \$ 0 & \$ 8,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

In a nonliquidating distribution, neither the partner nor the partnership recognizes gain or loss. The distribution is generally tax-free, and Atiqa's basis in the partnership interest is reduced by the partnership's basis in the distributed property.

Atiqa Receives a Nonliquidating Distribution of Land from Her Partnership Atiqa Partnership $28,000$8,000\begin{array} { | l | l | } \hline \text { Atiqa } & \text { Partnership } \\\hline \$ 28,000 & \$ 8,000\\\hline\end{array} Atiqa $28,000​ Partnership $8,000​​

Atiqa Receives a Nonliquidating Distribution of Land from Her Partnership $\begin{array} { | l | l | } \hline \text { Atiqa } & \text { Partnership } \\\hline \$ 28,000 & \$ 8,000\\\hline\end{array}$