Nicky's basis in her partnership interest was $150,000, including her $40,000 share of partnership liabilities. The partnership decides to liquidate, and after repaying all liabilities, distributes all remaining assets proportionately to the partners. Nicky receives $30,000 cash and inventory with a $50,000 basis and a $58,000 fair market value to the partnership. What loss does Nicky recognize, and what is her basis in the inventory?

Question

Quizplus · Accepted Answer

Nicky's basis in the partnership interest is $150,000. She receives $30,000 cash and inventory with a $50,000 basis. Her total received is $80,000 ($30,000 cash + $50,000 inventory basis). The loss is $70,000 ($150,000 - $80,000), but since the inventory basis is $50,000, the loss recognized is $30,000. Her basis in the inventory remains $50,000.

Nicky's Basis in Her Partnership Interest Was $150,000, Including Her