Stephanie receives a proportionate nonliquidating distribution from the QRS Partnership. The distribution consists of $60,000 cash and property with an adjusted basis to the partnership of $30,000 and a fair market value of $25,000. Immediately before the distribution, Stephanie's adjusted basis for her partnership interest is $80,000. Stephanie's basis in the noncash property received is:
A) $15,000.
B) $20,000.
C) $25,000.
D) $30,000.
E) None of the above.

Question

Quizplus · Accepted Answer

Stephanie's basis in the noncash property received is calculated by first reducing her partnership interest basis by the cash received: $80,000 - $60,000 = $20,000. Since the remaining basis ($20,000) is less than the partnership's adjusted basis in the property ($30,000), her basis in the noncash property is limited to $20,000.

Stephanie Receives a Proportionate Nonliquidating Distribution from the QRS Partnership