Question

Jenny has a $62,700 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 $93,000 fair value and a $80,500 basis to JM. The land is encumbered with a $38,250 mortgage (JM's only liability). What is Jenny's basis in the land and her remaining basis in JM after the distribution

Answer 1

$80,500 land basis, $1,325 JM basis.

Step-by-step explanation:

Calculation to determine Jenny's basis in the land and her remaining basis in JM after the distribution

Based on the information given Jenny transferred basis in the land will be the amount of $80,500 while Her remaining basis in JM on the other hand will be the amount of $1,325 which is calculated as:

Predistribution basis in JM $62,700

Add deemed contribution $19,125

(50%*$38,250)

Less: basis allocated to land ($80,500)

Remaining basis in JM $1,325

Therefore Jenny's basis in the land and her remaining basis in JM after the distribution will be :$80,500 land basis, $1,325 JM basis.