Daniela is a 25% partner in the JRD Partnership.On January 1,JRD makes a proportionate distribution of $16,000 cash,inventory with a $16,000 fair value (inside basis $8,000),and accounts receivable with a fair value of $8,000 (inside basis of $0)to Daniela.JRD has no liabilities at the date of the distribution.Daniela's basis in JRD is $21,000.What is Daniela's basis in the distributed inventory and accounts receivable?

Question

Quizplus · Accepted Answer

Since the distribution is proportionate, Daniela will receive 25% of each asset. Therefore, she will receive $4,000 cash, $4,000 inventory (25% of $16,000 fair value), and $2,000 accounts receivable (25% of $8,000 fair value). 
Her basis in the distributed inventory will be equal to the JRD's inside basis which is $8,000, multiplied by her percentage interest which is 25% = $2,000.
Her basis in the distributed accounts receivable will be equal to the fair value which is $2,000. 
Therefore, her basis in the inventory is $2,000 and her basis in the accounts receivable is $2,000, for a total basis of $4,000 in the distributed assets. Thus, the correct choice is C.

Daniela Is a 25% Partner in the JRD Partnership