Which of the following is true concerning a partner's basis in assets (other than money)distributed in an operating distribution?
A)A partner's bases in the distributed assets will be greater than the partnership's bases in the assets.
B)A partner's bases in the distributed assets will be equal to the partnership's bases in the assets.
C)A partner's bases in the distributed assets will be less than or equal to the partnership's bases in the assets.
D)None of the statements are true.

Question

Quizplus · Accepted Answer

A partner's basis in the distributed assets will be equal to the partnership's bases in the assets only if the assets are distributed in a liquidating distribution. In an operating distribution, the partner's basis will be less than or equal to the partnership's bases in the assets. This is because in an operating distribution, the partnership is not deemed to have sold the asset and the partner's share is considered a non-taxable return of capital. As a result, the partner's basis is reduced by the amount of the distribution, up to their share of the partnership's basis in the assets.

Which of the Following Is True Concerning a Partner's Basis