In a proportionate liquidating distribution, RST Partnership distributes to partner Riley cash of $30,000, accounts receivable (basis of $0 and fair market value of $40,000), and land (basis of $65,000 and fair market value of $50,000). Riley's basis was $40,000 before the distribution. On the liquidation, Riley recognizes a gain of $0, and her basis is $10,000 in the land and $0 in the accounts receivable.

Question

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Riley's basis in the land is reduced by the amount of the gain recognized on the distribution, which is $0. Her basis in the accounts receivable is $0 because the basis of the accounts receivable was $0 before the distribution.

In a Proportionate Liquidating Distribution, RST Partnership Distributes to Partner