Question

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?

Answer 1

a

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.

b

Outside basis = Basis before distribution – basis in land = $250 - $130 = $120

c

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.

d

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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