In 2015,Angel contributes land to a partnership with a basis of $12,000 and a FMV of $22,000.In 2016,when the FMV of the land is $28,000,the partnership distributes the land to Shelia,another partner.What is the basis of the land to Shelia assuming she has a $40,000 basis in her partnership interest?

Question

Quizplus · Accepted Answer

When Angel contributed the land to the partnership in 2015, the partnership's basis in the land became $12,000. In 2016, when the partnership distributed the land to Shelia, Shelia's basis in the land would be equal to the partnership's basis in the land immediately before the distribution, which is $12,000. However, Shelia's basis in her partnership interest is $40,000. This means that she has a built-in gain of $28,000 ($40,000 - $12,000). This built-in gain is preserved when the land is distributed to her, so her new basis in the land is $22,000 ($12,000 + $10,000 built-in gain). Therefore, the correct answer is D) $22,000.

In 2015,Angel Contributes Land to a Partnership with a Basis