Question

Hart's adjusted basis in Best Partnership was 9,000 at the time he received the following nonliquidating distribution of partnership property:

Cash 5,000

Land:

Adjusted basis 7,000
Fair market value 10,000

What was the amount of Hart's basis in the land?
1) 0
2) 4,000
3) 7,000
4) 10,000

Answer 1

Hart's basis in the land after receiving a nonliquidating distribution from Best Partnership would typically be $4,000, which is the remainder of his adjusted basis in the partnership after receiving $5,000 in cash.

Step-by-step explanation:

The subject of this question is a Business concept, specifically dealing with partner's tax basis in distributed property from a partnership. When a partner receives a nonliquidating distribution from a partnership, the partner's basis in the distributed property is determined based on their adjusted basis in the partnership before the distribution, according to the Internal Revenue Code.

In Hart's case, his adjusted basis in Best Partnership was $9,000. Since he received $5,000 in cash, his remaining basis before considering the land is $4,000 ($9,000 - $5,000). The adjusted basis of the land he received is $7,000, but since his remaining basis is only $4,000, and assuming there are no other considerations or liabilities that would alter these calculations, his basis in the land after the distribution would typically be limited to the $4,000, which is the remaining basis after the cash distribution.