Brian is a 25% partner in the BC Partnership.On January 1,BC distributes $20,000 cash and land with a $16,000 fair value (inside basis $8,000)to Brian.BC has no liabilities at the date of the distribution.Brian's basis in BC is $16,000.What is the amount and character of Brian's gain or loss on the distribution?

Question

Quizplus · Accepted Answer

Brian's basis in the partnership is $16,000. The total distribution he receives is $36,000 ($20,000 cash + $16,000 land). The excess of the distribution over his basis ($36,000 - $16,000 = $20,000) is a gain. Since the distribution exceeds his basis by $20,000, he recognizes a $4,000 capital gain, as his basis is reduced to zero after the cash distribution, and the remaining $4,000 is recognized as a gain.

Brian Is a 25% Partner in the BC Partnership