Daniela is a 25% partner in the JRD Partnership. On January 1, JRD distributes $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000), and accounts receivable with a fair value of $8,000 (inside basis of $0) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in JRD is $21,000. What is Daniela's basis in the distributed inventory and accounts receivable?

Question

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The basis of the distributed inventory is $8,000 (its inside basis) multiplied by Daniela's 25% ownership interest, which equals $2,000. Therefore, Daniela's basis in the inventory received is $16,000 (its fair value) minus $2,000, or $14,000.
The basis of the distributed accounts receivable is $0 (its inside basis) multiplied by Daniela's ownership interest, which equals $0. Therefore, Daniela's basis in the accounts receivable received is $8,000 (its fair value) minus $0, or $8,000.
Therefore, Daniela's basis in the distributed inventory and accounts receivable is $5,000 in inventory and $8,000 in accounts receivable, as stated in choice (C).

Daniela Is a 25% Partner in the JRD Partnership