Tyson is a 25% partner in the KT Partnership. On January 1, KT distributes $16,000 cash and land with a $16,000 fair value (inside basis $8,000) to Tyson. KT has no liabilities at the date of the distribution. Tyson's basis in KT is $20,000. What is Tyson's basis in the distributed land?

Question

Quizplus · Accepted Answer

Tyson's basis in the partnership is reduced by the cash distribution first, which is $16,000, leaving $4,000 of basis to be allocated to the land. Since the land's inside basis is $8,000, Tyson's basis in the land is limited to the remaining $4,000 of his partnership basis.

Tyson Is a 25% Partner in the KT Partnership