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 her JRD partnership interest is $21,000. What is Daniela's basis in the distributed inventory and accounts receivable?

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Daniela's bases in the distributed assets are $16,000 cash, $5,000 inventory, and $0 accounts receivable. She first allocates her outside basis to the distributed assets in an amount equal to JRD's basis ($16,000 cash, 8,000 inventory, and $0 accounts receivable). She then reduces the basis of the inventory and accounts receivable by the required decrease in proportion to their adjusted bases. The entire required decrease of $3,000 is allocated only to the inventory because the accounts receivable have no basis.

Daniela Is a 25% Partner in the JRD Partnership