Sabrina has a $12,000 basis in her S&B partnership interest.Sabrina receives a current cash distribution of $10,000 and equipment with a $5,000 basis (FMV $6,000).What is Sabrina's recognized gain or loss?

Question

Quizplus · Accepted Answer

Sabrina does not recognize any gain or loss on the receipt of a current distribution from the partnership because the total distribution ($10,000 cash + $5,000 basis in equipment = $15,000) is less than her basis in the partnership interest ($12,000). Her basis first reduces by the cash received, and then by the basis of the property (not its FMV), with no gain recognized unless the distribution exceeds her basis in the partnership.

Sabrina Has a $12,000 Basis in Her S&B Partnership Interest