In 2013,Angel contributes land to a partnership with a basis of $12,000 and a FMV of $22,000.In 2014,when the FMV of the land is $28,000,the partnership distributes the land to Shelia,another partner.What is the basis of the land to Shelia assuming she has a $40,000 basis in her partnership interest?

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When Angel contributed the land to the partnership, the partnership's basis in the land was $12,000, which became Angel's basis in her partnership interest. When the partnership later distributed the land to Shelia, the partnership's basis in the land ($12,000) became Shelia's basis in the land because she received it as a distribution of her partnership interest. However, because the fair market value of the land was $28,000 at the time of distribution, Shelia's basis is limited to the partnership's basis in the property immediately before the distribution, which is $12,000. Therefore, Shelia's basis in the land is $12,000, which is less than her partnership basis of $40,000. This is commonly referred to as a "basis limitation" rule.

In 2013,Angel Contributes Land to a Partnership with a Basis