Final answer:
Scott's basis in the land after the distribution from SOS Partnership is correct at $10,000, which matches his remaining outside basis after the cash has been received. However, the statement is FALSE as it incorrectly implies Scott recognizes no gain, which is not determined by the information given.
Step-by-step explanation:
The assertion that Scott recognizes no gain or loss on the distribution, and that his basis in the land is $10,000 after receiving a current distribution from the SOS Partnership, is FALSE. In a nonliquidating distribution from a partnership, a partner's basis in the distributed property is the same as the partnership's adjusted basis, but not more than the partner's outside basis reduced by any cash received. Here's how it works:
- Scott's initial basis in the partnership is $40,000.
- He receives a distribution of $30,000 in cash and land with a fair market value of $80,000 and an adjusted basis of $50,000.
- First, the cash reduces his outside basis from $40,000 to $10,000 (40,000 - 30,000).
- Then, the basis for the land he receives can't exceed the remaining outside basis, which is now $10,000.
Since SOS's basis in the land <$50,000> is more than Scott's remaining outside basis $10,000, the basis of the land to Scott would be $10,000, matching the remaining outside basis after the cash distribution. Therefore, Scott's basis in the land is correctly $10,000. However, the false part of the statement lies in the implication that he recognizes no gain; if the land's fair market value exceeds its basis to the partner, generally, a gain should be recognized. Nevertheless, under certain conditions of a nonliquidating distribution, gain is not recognized unless cash exceeds the outside basis of the partnership interest, which is not the case here.