Question

The BAM Partnership distributed the following assets to partner Barbie in a proportionate nonliquidating distribution: $10,000 cash, land parcel A (basis of $5,000, fair market value of $30,000) and land parcel B (basis of $10,000, fair market value of $30,000). Barbie's basis in her partnership interest was $40,000 immediately before the distribution. Barbie will allocate a basis of $10,000 and $20,000, respectively, to the two land parcels, and her basis in her partnership interest will be reduced to $0.

True False

Answer 1

True

Explanation : Barbie's basis in partnership interest immediately before distribution was 40,000.

The following assets distributed to Barbie as a non liquidation distribution :

Cash = $ 10,000

Basis of land parcel A = $ 10,000

Basis of land parcel B = $ 20,000

Total basis of assets distributed to Barbie = $ 10,000 + $ 10,000 + $ 20,000 = $ 40,000

After distribution, Barbie's remaining basis = Basis of partnership interest of Barbie before distribution - Basis of Distributed assets to Barbie = $ 40,000 - $ 40,000 = $ 0