Daniela is a 25% partner in the JRD Partnership. On January 1, JRD makes a proportionate distribution of $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000), and accounts receivable with a fair value of $8,000 (inside basis of $12,000) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in her JRD partnership interest is $20,000. What is Daniela's basis in the distributed inventory and accounts receivable?

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Daniela's bases in the distributed assets are $16,000 cash, $2,000 inventory, and $2,000 accounts receivable. She first allocates her outside basis to the distributed assets in an amount equal to JRD's basis ($16,000 cash, 8,000 inventory, and $12,000 accounts receivable). This results in a required decrease of $16,000. She reduces the basis in the accounts receivable by the unrealized depreciation ($4,000). Finally, she reduces the basis of the inventory and accounts receivable by the remaining required decrease ($12,000) in proportion to their adjusted bases after considering the previous steps. This results in a decrease of $6,000 to the inventory and $6,000 to the accounts receivable.

Daniela Is a 25% Partner in the JRD Partnership