Question

Two years ago, Kimberly became a 30 percent partner in the KST Partnership with a contribution of investment land with a $12,750 basis and a $19,850 fair market value. On January 2 of this year, Kimberly has a $18,300 basis in her partnership interest, and none of her pre-contribution gain has been recognized. On January 2 Kimberly receives an operating distribution of a tract of land (not the contributed land) with a $15,575 basis and an $22,675 fair market value.

a. What is the amount and character of Kimberly's recognized gain or loss on the distribution?
b. What is Kimberly’s remaining basis in KST after the distribution?
c. What is KST's basis in the land Kimberly contributed after Kimberly recevies the distribution?

Answer 1

a. What is the amount and character of Kimberly's recognized gain or loss on the distribution?

Kimberly's capital gain = land's FMV - other land's FMV = $22,675 - $19,850 = $2,825

b. What is Kimberly’s remaining basis in KST after the distribution?

Kimberly's basis = basis + gain - land basis = $18,300 + $2,825 - $15,575 = $5,550

c. What is KST's basis in the land Kimberly contributed after Kimberly receives the distribution?

KST's basis on the land = land's basis + Kimberly's gain = $12,750 + $2,825 = $15,575