Tyson is a 25% partner in the KT Partnership. On January 1, KT makes a proportionate, liquidating distribution of $16,000 cash and land with a $16,000 fair value (inside basis$8,000) to Tyson. KT has no liabilities at the date of the distribution. Tyson's basis in KTis $20,000. What is the amount and character of Tyson's gain or loss from the distribution?

Question

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Tyson's basis in the partnership is $20,000. The total distribution he receives is $32,000 ($16,000 cash + $16,000 land fair value). The inside basis of the land is $8,000, so the total basis of the distribution is $24,000 ($16,000 cash + $8,000 land basis). Since the distribution basis ($24,000) does not exceed Tyson's partnership basis ($20,000), there is no gain or loss recognized.

Tyson Is a 25% Partner in the KT Partnership