Kathy is a 25% partner in the KDP Partnership and receives a parcel of land with a fair value of $150,000 (inside basis of $100,000) in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $200,000. KDP currently has a §754 election in effect and has no hot assets or liabilities. What is KDP's special basis adjustment from the distribution?

Question

Quizplus · Accepted Answer

A partnership will have a negative basis adjustment when a partner receiving distributed property takes a basis in the property greater than the partnership's basis in the property. In this case, Kathy increases the basis of the land from $100,000 to $200,000. The $100,000 represents the amount of the negative basis adjustment to KDP.

Kathy Is a 25% Partner in the KDP Partnership and Receives