Noah, a partner in the LMN Partnership, had a tax basis in his partnership interest of $47,000 when he received a liquidating distribution of $25,000 cash and real property (a Section 1231 asset) with a tax basis of $15,000 to the partnership and a fair market value of $75,000.How much gain or loss does Noah recognize on the distribution and what is his basis in the property received?
A)Zero gain or loss recognized; $15,000 basis in the property.
B)Zero gain or loss recognized; $22,000 basis in the property.
C)$53,000 gain recognized; $75,000 basis in the property.
D)$7,000 loss recognized; $15,000 basis in the property.

Question

Quizplus · Accepted Answer

Noah recognizes no gain or loss on the liquidating distribution. His basis in the property received is calculated as his original basis ($47,000) minus the cash received ($25,000), resulting in a $22,000 basis in the property.

Noah, a Partner in the LMN Partnership, Had a Tax