Matt,a partner in the MB Partnership,receives a proportionate,nonliquidating distribution of property having a fair market value of $16,000 and a partnership basis of $23,000.Matt's basis in the partnership is $10,000 before the distribution.In this situation,Matt will take a $10,000 basis in the property,and his basis in the partnership interest is reduced to zero.

Question

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In a nonliquidating distribution, the partner's basis in the distributed property is limited to the partner's basis in the partnership interest before the distribution, which is $10,000 in this case. The partner's basis in the partnership is then reduced by the amount of the basis assigned to the distributed property, resulting in a zero basis.

Matt,a Partner in the MB Partnership,receives a Proportionate,nonliquidating Distribution of Property