Randolph is a 30percent partner in the RD Partnership. On January 1, RD distributes $15,000 cash, an investment with a fair value of $20,000 (inside basis of $10,000), and a parcel of land with a fair value of $10,000 (inside basis of $5,000)to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD Partnership interest is $48,000. What is Randolph's basis in the distributed investment and land?
A)$10,000 investment, $5,000 land.
B)$22,000 investment, $11,000 land.
C)$20,000 investment, $10,000 land.
D)$20,000 investment, $13,000 land.

Question

Quizplus · Accepted Answer

Randolph's total basis in the partnership is $48,000. After receiving $15,000 in cash, his remaining basis is $33,000. The total inside basis of the distributed assets is $15,000 ($10,000 for the investment and $5,000 for the land). Randolph's basis in the distributed assets must equal his remaining basis of $33,000. Therefore, the basis is allocated proportionally: $22,000 to the investment and $11,000 to the land.

Randolph Is a 30percent Partner in the RD Partnership