Riley is a 50% partner in the RF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31, Riley receives a proportionate operating distribution of $6,000 cash and a parcel of land with a $14,000 fair value and an $8,000 basis to RF. What is Riley's basis in the distributed property?

Question

Quizplus · Accepted Answer

Riley's basis in the distributed property is determined by reducing his outside basis by the cash received first, then by the basis of the land. Riley's initial basis is $56,000. After receiving $6,000 cash, his basis is reduced to $50,000. The land is taken at its basis to the partnership, which is $8,000, not its fair market value. Therefore, Riley's basis in the land is $8,000.

Riley Is a 50% Partner in the RF Partnership and Has