Cameron has a basis in his partnership interest of $5,000.Cameron's share of partnership income is $5,000.He also receives a cash distribution from the partnership of $13,000.What is his gain or loss as a result of the distribution?

Question

Quizplus · Accepted Answer

Cameron's basis in his partnership interest is $5,000. He received a $5,000 share of partnership income, which does not affect his basis. However, the $13,000 cash distribution reduces his basis to -$8,000 ($5,000 - $13,000). Since his basis is now negative, he has a loss of $3,000 ($5,000 - (-$8,000)) as a result of the distribution. Therefore, the correct answer is C.

Cameron Has a Basis in His Partnership Interest of $5,000