T receives a liquidating distribution of investment land with a partnership basis of $18,000 and a FMV of $40,000 when her basis in the partnership is $15,000.If a § 754 election is in effect, the bases of the partnership's remaining assets will be increased by

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The basis of the partnership's remaining assets will be increased by the difference between the FMV of the distributed property ($40,000) and T's basis in the partnership ($15,000), which is $25,000. However, since the partnership's basis in the land was $18,000, the increase in basis is limited to the excess of the FMV over the partnership's basis, which is $3,000.

T Receives a Liquidating Distribution of Investment Land with a Partnership