Question

Jenny has a $51,400 basis in her 50 percent partnership interest in the JM Partnership before receiving any distributions. This year JM makes a proportionate operating distribution to Jenny of a parcel of land with an $84,500 fair value and a $60,300 basis to JM. The land is encumbered with a $28,150 mortgage (JM's only liability). What is Jenny's basis in the land and her remaining basis in JM after the distribution?

Answer 1

Jenny's basis in the land is $65,475 and her remaining basis in JM after the distribution is $5,175 respectively

Step-by-step explanation:

The computations are shown below:

For jenny basis in the land:

= 50% Jenny basis + encumbered land value × partnership interest

= $51,400 + $28,150 × 50%

= $51,400 + $14,075

= $65,475

Now the remaining basis would be

= Jenny basis in the land - basis to JM

= $65,475 - $60,300

= $5,175

All other information which is given is not relevant. Hence, ignored it