The JIH Partnership distributed the following assets to partner James in a proportionate liquidating distribution in which the partnership also liquidated: $25,000 cash, land parcel A basis of $5,000, fair market value of $30,000) and land parcel B basis of $5,000, fair market value of $15,000). James's basis in his partnership interest was $85,000 immediately before the distribution. James will allocate bases of $40,000 to parcel A and $20,000 to parcel B, and he will have no remaining basis in his partnership interest.

Question

Quizplus · Accepted Answer

James's basis in his partnership interest is allocated to the distributed assets in proportion to their fair market values. The fair market value of parcel A is $30,000 and the fair market value of parcel B is $15,000. Therefore, James's basis in parcel A is $40,000 (30,000/45,000 * 85,000) and his basis in parcel B is $20,000 (15,000/45,000 * 85,000).

The JIH Partnership Distributed the Following Assets to Partner James