Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $15,000 cash, inventory 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 his is $37,000. What is Randolph's basis in the distributed inventory and land?

Question

Quizplus · Accepted Answer

Randolph's bases in the distributed assets are $15,000 cash, $10,000 inventory, and $12,000 land. He first allocates his outside basis to the distributed assets in an amount equal to RD's basis. He then allocates remaining basis to assets other than cash and hot assets with unrealized appreciation. Finally, the remaining basis is allocated to assets other than cash and hot assets based on their relative fair market values.

Randolph Is a 30% Partner in the RD Partnership