Question

Markell's basis in the Markit Partnership is $58,000. In a proportionate liquidating distribution, Markell receives the following assets:

Tax Basis FMV
Cash $ 8,000 $ 8,000
Land A $ 20,000 $ 45,000
Land B $ 20,000 $ 25,000

Problem 10-52 Part b (Static)
b. What is Markell's basis in the distributed assets?

Answer 1

Markell's basis in the distributed assets would be calculated as follows:

- Cash: Markell's basis remains the same at $8,000.

- Land A: Markell's basis in the partnership's Land A is $20,000, but since its FMV is $45,000, this represents a gain of $25,000. Markell's share of this gain is equal to their proportionate interest in the partnership, which is (1/1) or 100%. Therefore, Markell's basis in Land A would be $20,000 (original basis) + $25,000 (gain) = $45,000.

- Land B: Markell's basis in the partnership's Land B is $20,000, but since its FMV is $25,000, this represents a gain of $5,000. Markell's share of this gain is equal to their proportionate interest in the partnership, which is (1/1) or 100%. Therefore, Markell's basis in Land B would be $20,000 (original basis) + $5,000 (gain) = $25,000.

Therefore, Markell's total basis in the distributed assets would be $8,000 + $45,000 + $25,000 = $78,000.

Step-by-step explanation: