Mike contributed property to the MDB Partnership in 2008. At the time of the contribution, the basis in the property was $30,000 and its value was $55,000. In 2011, MDB distributed that property to partner Dana. Because distributions from a partnership to a partner are generally nontaxable, neither Mike nor Dana should recognize any gain on the distribution.

Question

Quizplus · Accepted Answer

When property is distributed from a partnership to a partner, the partner's basis in the property received is equal to their adjusted basis in their partnership interest. In this case, Mike's adjusted basis in his partnership interest would have decreased by the amount of the distribution, which would have been equal to the fair market value of the property at the time of distribution ($55,000). Therefore, if Dana sells the property in the future for an amount greater than $55,000, there would be a gain recognized by Mike and/or Dana.

Mike Contributed Property to the MDB Partnership in 2008