Miguel has a 50% interest in partnership capital, profits, and losses. The basis for his partnership interest is $50,000. The partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Miguel receives a distribution of land that has an FMV of $40,000 and an adjusted basis of $30,000. The land is subject to a $15,000 liability, which Miguel assumes. His basis in the partnership interest following the land distribution is

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Miguel's partnership basis before the land distribution is $50,000. He receives land with an FMV of $40,000, which increases his basis to $90,000 ($50,000 + $40,000). However, he also assumes a $15,000 liability, which decreases his basis to $75,000 ($90,000 - $15,000). Since Miguel has a 50% interest in the partnership, his basis in the partnership interest following the land distribution is $37,500 ($75,000 / 2), which is option D.

Miguel Has a 50% Interest in Partnership Capital, Profits, and Losses