Maggie,a partner in the Magpie partnership,received a proportionate nonliquidating distribution of $20,000 cash,unrealized receivables with a basis of $0 and a fair market value of $30,000,and land with a basis of $25,000 and a fair market value of $20,000.Her basis in the partnership interest immediately before the distributions was $30,000.She will recognize $0 gain on the distribution,and her basis in the receivables and land will be $0 and $20,000 respectively.

Question

Quizplus · Accepted Answer

Maggie received a total distribution of $50,000 ($20,000 cash + $30,000 worth of unrealized receivables and land). The distribution of unrealized receivables with a fair market value of $30,000 will be treated as if Maggie received cash and immediately contributed that cash back to the partnership. Therefore, Maggie will recognize a gain of $5,000 ($30,000 fair market value - $0 basis - $25,000 allocated basis) on the distribution of unrealized receivables. Her basis in the land will be $0 ($25,000 allocated basis - $20,000 fair market value), not $20,000 as stated in the statement.

Maggie,a Partner in the Magpie Partnership,received a Proportionate Nonliquidating Distribution