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32. The ABCD partnership has four partners. Each partner’s adjusted basis in the partnership interest owned...

32. The ABCD partnership has four partners. Each partner’s adjusted basis in the partnership interest owned by that partner was $40,000 on the first day of last year. The partnership reported net income for last year of $80,000 (there were no separately stated items to take into account). The partnership distributed pro rata to each partner $55,000 in cash plus identical parcels of land that each had a fair market value of $25,000 and a basis to the partnership of $10,000. How much is includible in each partner’s gross income for the year as the result of the distribution?

a. $10,000

b. $55,000

c. $25,000

d. $5,000

e.        0

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Homework Answers

Answer #1

Correct answer is D.

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Adjusted basis in partnership = $40,000

Cash received = $55,000

Balance = (55000 – 40000) = $15,000 Gain

Land received = $10,000

Includable income in each partner's gross income = $15,000 - $10,000 = $5,000                              

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Feel free to comment if you need further assistance J

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