Larry's partnership interest basis is $60,000.Larry receives a proportionate,liquidating distribution from a liquidating partnership of $45,000 cash and inventory having a basis of $30,000 to the partnership and a fair market value of $28,000.Larry assigns a basis of $15,000 to the inventory and recognizes no gain or loss.

Question

Quizplus · Accepted Answer

Larry assigned a basis of $15,000 to the inventory, which is less than its adjusted basis of $30,000. This means he recognized a loss of $15,000, but since it is a liquidating distribution, the loss cannot be recognized for tax purposes. Therefore, Larry's basis in the inventory is $30,000, which combined with the $45,000 cash distribution equals his initial basis of $60,000.

Larry's Partnership Interest Basis Is $60,000