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's gain is calculated as follows:

FMV of distributed land (12,000) - Basis of contributed land (5,000) = $7,000 gain

Sergio's basis in the distributed land is equal to the FMV at the time of distribution, which is $12,000. Therefore, Sergio does not recognize any gain on the distribution.

The total gain recognized in the partnership is the same as the gain recognized by Mirabelle, which is $7,000.

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