Mack has a basis in a partnership interest of $200,000, including his share of partnership debt. At the end of the current year, the partnership distributed to Mack, in a proportionate nonliquidating distribution, cash of $20,000, inventory (basis to the partnership of $30,000 and fair market value of $40,000), and land (basis to the partnership of $40,000 and fair market value of $42,000).In addition, Mack's share of partnership debt decreased by $12,000 during the year. What basis does Mack take in the inventory and land and in the partnership interest (including debt share) following the distribution?
A)$30,000 basis in inventory; $40,000 basis in land, $98,000 basis in partnership.
B)$30,000 basis in inventory; $42,000 basis in land, $110,000 basis in partnership.
C)$40,000 basis in inventory; $40,000 basis in land, $86,000 basis in partnership.
D)$40,000 basis in inventory; $42,000 basis in land, $98,000 basis in partnership.
E)$40,000 basis in inventory; $42,000 basis in land, $110,000 basis in partnership.

Question

Quizplus · Accepted Answer

Mack's basis in the partnership interest is reduced by the cash distribution ($20,000) and the decrease in his share of partnership debt ($12,000), resulting in a new basis of $168,000. The inventory takes a carryover basis of $30,000, and the land takes a carryover basis of $40,000. After accounting for these distributions, Mack's remaining basis in the partnership is $98,000.

Mack Has a Basis in a Partnership Interest of $200,000