Sarah is a 50% partner in the SF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributions. On December 31, Sarah receives a proportionate operating distribution of $20,000 cash. What is the amount and character of Sarah's recognized gain or loss and what is her basis in her partnership interest?

Question

Quizplus · Accepted Answer

Sarah does not recognize any gain or loss on the distribution. She reallocates her basis in SF to the cash in an amount equal to the distribution, $20,000. Her remaining basis is $36,000 ($56,000 - $20,000).

Sarah Is a 50% Partner in the SF Partnership and Has