Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution)two parcels of land to Jaime, each valued at $30,000. Prior to the distribution, the partnership's basis in parcel A is $40,000 and the basis in parcel B is $20,000. Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B.

Question

Quizplus · Accepted Answer

In a non-liquidating distribution of property by a partnership, 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. Therefore, Jaime should allocate $40,000 of basis to parcel A (the partnership's basis) and $10,000 to parcel B (to not exceed her outside basis of $50,000 in the partnership).

Jaime Has a Basis in Her Partnership Interest of $50,000