Frank receives a proportionate nonliquidating distribution from the AEF Partnership. The distribution consists of $10,000 cash and property (adjusted basis to the partnership of $54,000 and fair market value of $60,000). Immediately before the distribution, Frank's adjusted basis in the partnership interest was $50,000. His basis in the noncash property received is:
A)$0.
B)$40,000.
C)$54,000.
D)$60,000.
E)None of the above.

Question

Quizplus · Accepted Answer

When a partner receives a proportionate nonliquidating distribution, the partner's basis in the property received is equal to the partnership's adjusted basis in the property. In this case, Frank received property with an adjusted basis of $54,000, so his basis in the property received is also $54,000. Therefore, his basis in the noncash property received is $54,000 and his overall basis in the partnership interest after the distribution is $50,000 + $54,000 = $104,000.

Frank Receives a Proportionate Nonliquidating Distribution from the AEF Partnership