Landis received $90,000 cash and a capital asset (basis of $50,000, fair market value of $60,000) in a proportionate liquidating distribution. His basis in his partnership interest was $120,000 prior to the distribution. How much gain or loss does Landis recognize, and what is his basis in the asset received?

Question

Quizplus · Accepted Answer

Landis recognizes no gain or loss because the total distribution ($90,000 cash + $60,000 FMV of asset = $150,000) does not exceed his basis in the partnership ($120,000). His basis in the asset received is the remaining basis after the cash distribution, which is $30,000 ($120,000 - $90,000).

Landis Received $90,000 Cash and a Capital Asset (Basis of $50,000