Question

# Tom is a partner in TXY partnership. His adjusted basis in the partnership is \$30,000. During...

Tom is a partner in TXY partnership. His adjusted basis in the partnership is \$30,000. During the year, he receives the following distributions:

AB                              FMV

Cash                                                    \$25,000                       \$25,000

Property                                              \$25,000                       \$50,000.

These are non-liquidating, proportionate, pro-rata distributions.

a. What gain, if any, must Tom recognize on these distributions?

b. What is Tom’s basis in the property?

a) In this problem the adjusted basis is \$30,000.

When it comes to cash the adjusted basis is \$25,000 and the outstide adjusted basis is \$30000, so there is a loss of \$5000(\$3000-\$25000) and the FMV is also the same \$25000. So in cash no gain only loss.

When it comes to property, the adjusted basis is \$30000. The FMV is \$50000. But as the adjusted basis is \$3000, there is a gain of \$20000(\$50000-\$30000). So there is a gain interms of property.

b) Tom bais is propery is \$20000. This is derived from adjusted basis minus the FMV. So that comes to \$20000.

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