Jeremy receives a proportionate nonliquidating distribution from the JKL Partnership when the basis of his interest is $100,000. The distribution consists of cash of $25,000, land with a basis of $30,000 and a fair market value of $65,000, and inventory with a partnership basis of $50,000 and fair market value of $60,000. As a result of this distribution, Jeremy recognizes a $50,000 gain and takes a $65,000 basis in the land and a $60,000 basis in the inventory.

Question

Quizplus · Accepted Answer

In a nonliquidating distribution, Jeremy does not recognize a gain unless the cash received exceeds his basis in the partnership interest. The basis in the distributed property is the lesser of the partnership's basis or Jeremy's remaining basis after cash distribution.

Jeremy Receives a Proportionate Nonliquidating Distribution from the JKL Partnership