Kristen and Harrison are equal partners in the KH Partnership. The partners formed the partnership 5 years ago by contributing cash. Prior to any distributions Harrison has a basis in his partnership interest of $44,000. On December 31, KH makes a proportionate operating distribution of $50,000 cash to Harrison. What is the amount and character of Harrison's recognized gain or loss and what is his remaining basis in KH?

Question

Quizplus · Accepted Answer

Harrison recognizes a gain equal to the difference between his basis in KH and the distribution because he receives only money in the distribution and the amount exceeds his basis in KH. He allocates his entire basis in KH to the basis in the money received resulting in $0 basis in KH after the distribution.

Kristen and Harrison Are Equal Partners in the KH Partnership