Question

A and B are equal partners in ABC partnership with each having an outside basis in their partnership interest of $100,000. The partnership distributes land with a basis of $30,000 and a FMV of $60,000 to A and Equipment with a basis of $40,000 and a FMV of $50,000 to B. Do A or B have any gain or loss on the distributions? What basis does each take in the assets received?

Answer 1

When property or any asset is distributed to partners ,the partnership firm must treat it as a sale in fair market value(FMV).And partners account is debited or decreased by the fair market value of asset taken over by them.not book value.

There fore in the above Question , A and B have equal interest in partnership firm ,and having capital of $ 100000.

Particulars	A	B
Capital	$ 100000	$10000
less fair market value of land	$ 60000	----------
less fair market value of equipment	---------------	$50000
Balance due in capital account of partners	$ 40000	$ 50000

Mr. A has gain in this distribution.he received $60000 as the fairmarket value of land which is $10000 more than that received by Mr.B.Or in otherwords B incurr loss of $10000 as he received equipment of fairmarket $50000 which is lesser than fairmarket value of land received by mr.A