Question

Problem 11-24 (LO. 2) When Teri's outside basis in the TMF Partnership is $80,000, the partnership distributes to her $30,000 cash, an account receivable (fair market value of $60,000, inside basis to the partnership of $0), and a parcel of land (fair market value of $60,000, inside basis to the partnership of $80,000). Teri remains a partner in the partnership, and the distribution is proportionate to the partners.

If an amount is zero, enter "0".

c. How much is Teri's basis in the land, account receivable, and TMF Partnership after the distribution?

Land	$
Accounts receivable	$
Partnership	$

What can you conclude regarding Teri's basis in the assets and the fair market value she received?
The distribution results ? on these assets.

d. How would your answer to part (c) change if, instead, the partnership's basis in the land was $10,000 and its fair market value was $30,000 (and the cash and unrealized receivable distributions do not change)?

Land	$
Accounts receivable	$
Partnership	$

Answer 1

c.         The cash is deemed distributed first and reduces Teri’s outside basis to $50,000. The account receivable is distributed next, and takes a substituted and carryover basis of $0. The land is distributed last and takes a substituted basis equal to Teri’s remaining basis in her partnership interest of $50,000. The receivable distribution does not change Teri’s outside basis. Teri’s basis, then, in the partnership interest is $0 ($80,000 – $30,000 – $0 – $50,000). The value she received was $150,000 (compared to her basis of $80,000), but she recognizes no gain or loss because of the basis allocation and ordering rules.