Martha is a 40percent partner in the MMM Partnership, with an outside basis of $50,000. MMM distributes $40,000 cash and accrual-basis accounts receivable with a basis and fair market value of $20,000. Martha does not recognize gain or loss on the distribution and takes a basis in the cash of $40,000 and a basis in the receivables of $10,000.

Question

Quizplus · Accepted Answer

Martha's outside basis is $50,000, and she receives $40,000 in cash and $20,000 in receivables. Her total basis in the distributed property is $60,000, which is greater than her outside basis. Therefore, she does not recognize gain or loss on the distribution.

Martha Is a 40percent Partner in the MMM Partnership, with an Outside