In a proportionate liquidating distribution,RST Partnership distributes to partner Rita cash of $10,000,accounts receivable (basis of $0 and fair market value of $20,000),and land (basis of $25,000 and fair market value of $20,000).Rita's basis was $40,000 before the distribution.On the liquidation,Rita recognizes a gain of $10,000,and her basis is $20,000 in each the land and accounts receivable.

Question

Quizplus · Accepted Answer

In a proportionate liquidating distribution, Rita would not recognize a gain. Her basis in the partnership is reduced by the basis of the distributed assets, and any remaining basis is allocated to the land and accounts receivable. The basis in the accounts receivable would be $0, and the basis in the land would be $30,000 ($40,000 initial basis - $10,000 cash).

In a Proportionate Liquidating Distribution,RST Partnership Distributes to Partner Rita