Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.This year the land is distributed to Sergio,another partner in the partnership.At the time of distribution,the land had a $12,000 FMV.How much gain should Mirabelle and Sergio recognize?

Question

Quizplus · Accepted Answer

Mirabelle will recognize gain equal to the difference between the FMV at the time of distribution ($12,000) and her basis ($5,000), which is $7,000. Sergio will take a carryover basis equal to Mirabelle's basis before the distribution ($5,000). Therefore, Sergio will have no gain upon receiving the land. The total gain recognized will be $7,000.

Mirabelle Contributed Land with a $5,000 Basis and a $9,000