Frank receives a proportionate current (nonliquidating) distribution from the AEF Partnership. The distribution consists of $10,000 cash and property (adjusted basis to the partnership of $54,000 and fair market value of $60,000). Immediately before the distribution, Frank's adjusted basis in the partnership interest was $50,000. His basis in the noncash property received is:
A) $0.
B) $40,000.
C) $50,000.
D) $54,000.
E) $60,000.

Question

Quizplus · Accepted Answer

Frank's basis in the partnership interest is reduced first by the cash received ($10,000), leaving him with a $40,000 basis. This remaining basis is then allocated to the noncash property received.

Frank Receives a Proportionate Current (Nonliquidating) Distribution from the AEF