In addition to its other assets, BC LLC owns unrealized receivables basis = $0, fair market value = $60,000). If BC
distributes $60,000 cash to Bart and the unrealized receivable to Charles, then Bart will recognize ordinary income of
$30,000 and Charles will have a basis of $30,000 in receivables valued at $60,000.

Question

Quizplus · Accepted Answer

The unrealized receivable is a capital asset. When a capital asset is distributed to a partner, the partner's basis in the asset is equal to the asset's fair market value. In this case, the unrealized receivable has a fair market value of $60,000, so Charles' basis in the receivable will be $60,000.

In Addition to Its Other Assets, BC LLC Owns Unrealized