Question

At the beginning of the year, Elsie’s basis in the E&G Partnership interest is $80,000. She receives a proportionate current (nonliquidating) distribution from the partnership consisting of $20,000 of cash, unrealized accounts receivable (basis of $0, fair market value $40,000), and land (basis of $20,000, fair market value of $50,000). After the distribution, Elsie’s bases in the accounts receivable, land, and partnership interest are:

a. $0; $30,000; and $50,000.

b. $0; $50,000; and $30,000.

c. $40,000; $30,000; and $10,000.

d. $40,000; $40,000; and $0.

e. $0; $20,000; and $40,000.

Answer 1

Answer -

Particulars	Explanation
After the distribution, Elsie’s bases in the accounts receivable, land, and partnership interest are $0; $20000; and $40000.	Elsie's $80000 basis is first reduced by the cash distribution of $20000 to $60000 . The accounts receivable are distributed next and take a carryover basis of $0 . The land is distributed last and takes a carryover basis of $20000 . This reduces the basis in the partnership interest to $40000.

Hence, Option - (e) is Correct.