Mariana is a partner in the Benson Partnership. At the close of the current year, Mariana's basis in the partnership is $23,000. At that time, the partnership distributes cash of $6,000 and property with a basis of $4,000 and a fair market value of $7,000 to each partner. What amount must Mariana report as income from the distribution in the current year?
A)$- 0 -
B)$4,000
C)$6,000
D)$10,000
E)$13,000

Question

Quizplus · Accepted Answer

In a partnership, distributions are generally not considered taxable income to the partner unless the amount of cash received exceeds the partner's basis in the partnership. In this case, Mariana's basis is $23,000, and the distribution consists of $6,000 in cash and property with a basis of $4,000 (regardless of its fair market value). The total distribution is $10,000, which is less than Mariana's basis in the partnership. Therefore, Mariana does not have to report any of the distribution as income.

Mariana Is a Partner in the Benson Partnership