The MBC Partnership makes a § 736(b)cash payment of $50,000 to partner Betty in liquidation of her interest in the partnership.The partnership owns no hot assets.Betty's basis in her partnership interest before the distribution was $20,000.If the partnership has a § 754 election in effect,it will record a $30,000 decrease in its inside basis in partnership assets,allocable to the remaining partners in the partnership.

Question

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A distribution in which the partner reports a gain results in a step-up in partnership asset basis under § 754.As Betty receives a distribution of $50,000 cash against a basis of $20,000,she must report a $30,000 gain.A step-up resulting from a distribution to a partner is allocated to the remaining assets in the partnership and benefits the remaining partners.

The MBC Partnership Makes a § 736(b)cash Payment of $50,000