Scott owns a 30% interest in the capital and profits of the SOS Partnership. Immediately before he receives a proportionate current (nonliquidating) distribution from SOS, the basis of his partnership interest is $40,000. The distribution consists of $30,000 in cash and land with a fair market value of $80,000. SOS's adjusted basis in the land immediately before the distribution is $50,000. As a result of the distribution, Scott recognizes no gain or loss and his basis in the land is $10,000.

Question

Quizplus · Accepted Answer

The distribution is proportionate, so Scott's basis in his partnership interest is reduced by the amount of the distribution, $30,000. His basis in the land is then $10,000, which is the fair market value of the land minus the amount of the distribution that was allocated to the land, $80,000 - $30,000.

Scott Owns a 30% Interest in the Capital and Profits