Ariel receives from her partnership a nonliquidating distribution of $9,000 cash plus a parcel of land.The partnership had purchased the land five years ago for $20,000,but it is worth $28,000 at the time of the distribution.Ariel's predistribution basis is $17,000.How much income will Ariel recognize due to the distribution,and what is her basis in the land?

Question

Quizplus · Accepted Answer

To determine the income Ariel will recognize due to the distribution, we need to compare the cash received ($9,000) to her pre-distribution basis ($17,000). Since the cash received is less than her pre-distribution basis, Ariel will not recognize any income from the cash distribution.

To determine her basis in the land, we start with her pre-distribution basis ($17,000) and adjust it by the fair market value of the land received ($28,000). Therefore, Ariel's new basis in the land is $45,000 ($17,000 + $28,000).

Therefore, the correct answer is B.

Ariel Receives from Her Partnership a Nonliquidating Distribution of $9,000