benny is a partner in the ben partnership. his outside basis is $250. he receives a distribution of land worth $400 which has a basis inside the partnership of $130
a)is the distribution taxable to Benny? if not, why not?
b)what is Benny's outside basis after the distribution?
c)assume this was a non-liquidating distribution. what is Benny's basis in the land?
d)assume this was a liquidating distribution, what is Benny's basis in the land after the distribution?
Distribution is not taxable as distribution is not in excess of basis in partnership. Partner’s outside basis before distribution is $250. Partnership land has $130 basis to partnership. Distribution reduces partner’s outside basis by $130.
Outside basis = Basis before distribution – basis in land = $250 - $130 = $120
In non-liquidating distribution basis in land received is equal to basis in it for partnership before distribution. Thus, basis in land is $130 to partner.
In liquidating distribution no gain or loss is recognized. Basis in land is equal to partner’s outside basis in partnership before distribution.
It makes basis in land at $250 to partner.
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