The QBI for each business is subject to the greater of two limitations: (1) 50% of W-2 wages ($20,000, or $40,000 x 50%) or (2) 25% of W-2 wages plus 2.5% of unadjusted basis {$40,000, or [($40,000 x 25%)= $10,000 + ($1.2 million x 2.5%) = $30,000]}. The greater of the two limitations is $40,000. Because this $40,000 is less than Patricia's tentative $50,000 QBI, the lower amount must be used. Patricia's QBI for this trade or business, then, is $40,000.
-At the beginning of the year, Elsie's basis in the E&G Partnership interest is $90,000. She receives a proportionate current (nonliquidating) distribution from the partnership consisting of $10,000 of cash, unrealized accounts receivable (basis of $0, fair market value $40,000), and land (basis of $30,000, fair market value of $50,000). After the distribution, Elsie's bases in the accounts receivable, land, and partnership interest are:
A) $0; $30,000; and $50,000.
B) $0; $50,000; and $30,000.
C) $40,000; $30,000; and $10,000.
D) $40,000; $40,000; and $0.
E) $40,000; $50,000; and $0.

Question

Quizplus · Accepted Answer

In a nonliquidating distribution from a partnership, the basis of cash received is its face value, and the basis of property (other than money) received is the partnership's adjusted basis in the property immediately before the distribution. Unrealized receivables have a basis of $0 because they are valued at their basis in the hands of the partnership, not their fair market value. The land's basis to Elsie is the partnership's basis in the land, which is $30,000. After receiving $10,000 in cash, Elsie's basis in her partnership interest is reduced by that amount, from $90,000 to $80,000. The distribution of the land with a basis of $30,000 further reduces her partnership interest basis by $30,000, leaving her with a $50,000 basis in the partnership interest. The accounts receivable do not affect her basis because their basis is $0.

The QBI for Each Business Is Subject to the Greater