Jaime has a basis in her partnership interest of $50,000 when the partnership distributes (in an operating distribution)two parcels of land to Jaime,each valued at $30,000.The basis in parcel A is $40,000 and the basis in parcel B is $20,000.Jaime allocates $20,000 of basis to parcel A and $30,000 of basis to parcel B.

Question

Quizplus · Accepted Answer

The allocation of basis should match the fair market values of the property received. In this case, Jaime received two parcels of land valued at $30,000 each, for a total value of $60,000. However, her basis in the partnership interest was only $50,000. Therefore, the basis allocation should be adjusted accordingly to reflect the fair market values of the properties received.

One possible allocation could be:

- Parcel A: Basis allocation = ($30,000 / $60,000) x $50,000 = $25,000
- Parcel B: Basis allocation = ($30,000 / $60,000) x $50,000 = $25,000

This would result in a total basis allocation of $50,000, which matches Jaime's basis in the partnership interest.

Therefore, the given statement that Jaime allocated $20,000 of basis to parcel A and $30,000 of basis to parcel B is false.

Jaime Has a Basis in Her Partnership Interest of $50,000