In a proportionate liquidating distribution, RST Partnership distributes to partner Riley cash of $30,000, accounts receivable (basis of $0, fair market value of $40,000), and land (basis of $65,000, fair market value of $50,000). Riley's basis was $40,000 before the distribution. On the liquidation, Riley recognizes a gain of $0, and her basis is
$10,000 in the land and $0 in the accounts receivable.

Question

Quizplus · Accepted Answer

Riley's basis in the land is reduced by the amount of gain recognized on the distribution, which is $0. Therefore, Riley's basis in the land is $65,000 - $0 = $65,000. Riley's basis in the accounts receivable is $0 because the accounts receivable had a basis of $0 before the distribution.

In a Proportionate Liquidating Distribution, RST Partnership Distributes to Partner