Before receiving a liquidating distribution, Kathy's basis in her interest in the KLM Partnership is $30,000. The distribution consists of $5,000 in money, inventory having a $1,000 basis to the partnership and a $2,000 FMV, and two parcels of undeveloped land (not held as inventory)having basis of $3,000 and $9,000 to the partnership with FMVs of $5,000 and $12,000, respectively. What is Kathy's basis in each parcel of land?

Question

Quizplus · Accepted Answer

Kathy's basis in each parcel of land is determined by allocating the total basis of $12,000 in the land between the two parcels based on their respective FMVs. This results in the following basis amounts:

- Parcel 1: ($5,000 / $17,000) x $12,000 = $3,529.41
- Parcel 2: ($12,000 / $17,000) x $12,000 = $8,470.59

Therefore, Kathy's basis in each parcel of land is $3,529.41 for Parcel 1 and $8,470.59 for Parcel 2.

Before Receiving a Liquidating Distribution, Kathy's Basis in Her Interest