Carl's basis in his LLC interest is $10,000. In a current nonliquidating) distribution, Carl receives land basis =
$10,000; fair market value = $12,000); and inventory basis = $6,000; fair market value = $8,000). Carl takes a
$10,000 basis in the land and a $0 basis in the inventory, and has a $0 basis in the LLC interest.

Question

Quizplus · Accepted Answer

Carl's basis in the land would indeed be $10,000, as the basis of distributed property to a partner is the partnership's basis in the property. However, Carl would not have a $0 basis in the inventory. Instead, Carl would allocate the remaining $6,000 of his original $16,000 basis in the LLC interest (after allocating $10,000 to the land) to the inventory, giving the inventory a basis of $6,000. Carl's basis in the LLC interest would be reduced to $0 after the distribution.

Carl's Basis in His LLC Interest Is $10,000