Sarah is a 50% partner in the SF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31, Sarah receives aproportionate operating distribution of $20,000 cash. What is the amount and character of Sarah's recognized gain or loss and what is her basis in her partnership interest?

Question

Quizplus · Accepted Answer

Sarah's recognized gain is $0 because the cash distribution does not exceed her outside basis. Her basis in the partnership interest is reduced by the amount of the cash distribution, resulting in a new basis of $36,000 ($56,000 - $20,000).

Sarah Is a 50% Partner in the SF Partnership and Has