Jenny has a $54,000 basis in her 50% partnership interest in the JM Partnership before receiving any distributions.This year JM makes a proportionate current distribution to Jenny of a parcel of land with an $80,000 fair value and a $64,000 basis to JM.The land is encumbered with a $30,000 mortgage (JM's only liability).What is Jenny's basis in the land and her remaining basis in JM after the distribution?

Question

Quizplus · Accepted Answer

Jenny's basis in the land is the partnership's basis of $64,000. Her basis in JM is reduced by the $34,000 net distribution ($64,000 land basis - $30,000 mortgage assumed), leaving her with a $5,000 basis in JM ($54,000 initial basis - $34,000 net distribution + $30,000 mortgage assumed).

Jenny Has a $54,000 Basis in Her 50% Partnership Interest