Aaron owns a 30% interest in a continuing partnership.The partnership distributes a $35,000 year-end cash payment to all the partners.In a proportionate nonliquidating distribution, the partnership also distributed property (basis of $15,000, fair market value of $20,000) to Aaron.Immediately before the distribution, Aaron's basis in the partnership interest was $50,000.As a result of the distribution, Aaron recognizes:
A)No gain or loss.
B)Ordinary loss of $5,000.
C)Capital loss of $5,000.
D)Ordinary gain of $5,000.
E)Capital gain of $5,000.

Question

Quizplus · Accepted Answer

In a proportionate nonliquidating distribution, no gain or loss is recognized by the partner. Aaron's basis in the partnership interest is reduced by the cash and the basis of the property received.

Aaron Owns a 30% Interest in a Continuing Partnership