Partner R received a current distribution from the RST Partnership consisting of $20,000 cash, $6,000 of partnership zero basis accounts receivables, and a capital asset (FMV $7,000 and basis $1,500).The distribution did not change R's profit and loss sharing ratio.Immediately prior to the distribution, R's outside basis in his partnership interest was $25,000.After the distribution, what basis does R have in the receivables, the capital asset, and his partnership interest?

Question

Quizplus · Accepted Answer

In a current distribution, the partner's basis in the distributed property is the same as the partnership's basis in the property immediately before the distribution, but not exceeding the partner's outside basis in the partnership interest minus any money received. Here, the receivables have a zero basis, so the partner's basis in the receivables is $0. The capital asset has a basis of $1,500, so the partner's basis in the capital asset is $1,500. After the distribution, the partner's outside basis in the partnership interest is reduced by the cash received ($20,000) and the FMV of the property received ($6,000 + $7,000 = $13,000), totaling $33,000. However, since the partner's outside basis before the distribution was $25,000, the remaining basis after accounting for the cash and the basis in the capital asset ($25,000 - $20,000 - $1,500 = $3,500) is allocated to the partnership interest. The receivables' basis remains at $0 because they had a zero basis in the partnership's hands.

Partner R Received a Current Distribution from the RST Partnership