The BAM Partnership distributed the following assets to partner Barbie in a proportionate nonliquidating distribution:
$10,000 cash, land parcel A (basis of $5,000, fair market value of $30,000) and land parcel B (basis of $25,000, fair market value of $30,000). Barbie's basis in her partnership interest was $40,000 immediately before the distribution. Barbie will allocate a basis of $15,000 each to the two land parcels, and her basis in her partnership interest will be reduced to $0.

Question

Quizplus · Accepted Answer

In a proportionate nonliquidating distribution, Barbie's basis in her partnership interest is first reduced by the cash received, then the remaining basis is allocated to the land parcels based on their adjusted basis, not fair market value.

The BAM Partnership Distributed the Following Assets to Partner Barbie