When a partner's basis in his partnership interest is less than the partnership's basis in a distributed asset, the partner's basis in his partnership interest is allocated among the assets according to their relative fair market values.

Question

Quizplus · Accepted Answer

When a partner's basis in his partnership interest is less than the partnership's basis in a distributed asset, the partner's basis in the distributed asset is first reduced to zero, and any remaining basis in the partnership interest is allocated among the other distributed assets, but not based on their relative fair market values. Instead, the allocation is based on the partnership's basis in those assets.

When a Partner's Basis in His Partnership Interest Is Less