In a proportionate liquidating distribution in which the partnership is also liquidated, Ralph received cash of $30,000, accounts receivable basis of $0, fair market value of $20,000), and land basis of $1,000, fair market value of
$10,000; treated as a capital asset by the partnership). Immediately before the distribution, Ralph's basis in the partnership interest was $40,000. Ralph realizes and recognizes a loss of $9,000, and his basis is $0 in the accounts receivable and $1,000 in the land.

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Ralph's basis in the partnership interest immediately before the distribution was $40,000. After receiving cash of $30,000, his remaining basis for the distribution of other assets would be $10,000. Since the basis must be allocated to the assets received, and the accounts receivable have a basis of $0 (and cannot have a negative basis), the entire remaining basis of $10,000 would be allocated to the land. Ralph does not realize or recognize a loss in a liquidating distribution; instead, his basis in the received assets is adjusted. Therefore, Ralph's basis would be $0 in the accounts receivable and $10,000 in the land, not $1,000.

In a Proportionate Liquidating Distribution in Which the Partnership Is