Mark receives a proportionate current (nonliquidating) distribution. At the beginning of the partnership year, the basis of his partnership interest is $100,000. During the year, he received a cash distribution of $40,000 and a property distribution (basis of $30,000, fair market value of $25,000). In addition, Mark's share of partnership liabilities was reduced by $10,000 during the year. How much gain or loss does Mark recognize; what is his basis in the property he received; and what is his remaining basis in the partnership interest?
A) $25,000 loss; $25,000 basis in property; $0 remaining basis.
B) $30,000 loss; $30,000 basis in property; $0 remaining basis.
C) $0 gain or loss; $25,000 basis in property; $25,000 remaining basis.
D) $0 gain or loss; $30,000 basis in property; $20,000 remaining basis.
E) $0 gain or loss; $30,000 basis in property; $30,000 remaining basis.

Question

Quizplus · Accepted Answer

Mark does not recognize any gain or loss on a proportionate current distribution. His basis in the property received is its basis to the partnership ($30,000). The reduction in partnership liabilities is treated as a cash distribution. Thus, his total distributions are $40,000 (cash) + $10,000 (liability reduction) = $50,000. Subtracting this from his initial basis ($100,000) and adding the basis of the property received ($30,000) leaves him with a remaining basis in the partnership interest of $20,000.

Mark Receives a Proportionate Current (Nonliquidating) Distribution