Question

Two years ago, Kimberly became a 30 percent partner in the KST Partnership with a contribution of investment land with a $10,000 basis and a $16,000 fair market value. On January 2 of this year, Kimberly has a $15,000 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 $12,000 basis and an $18,000 fair market value.

a. What is Kimberly’s remaining basis in KST after the distribution?
b. What is KST’s basis in the land Kimberly contributed after Kimberly receives this distribution?

Answer 1

A. $6,000

B. $13,000

Step-by-step explanation:

A. Calculation to determine Kimberly’s remaining basis in KST after the distribution

Basis in KST$ 15,000

Add §737 gain $3,000

($15,000-$12,000)

Deduct Carryover basis in land ($12,000)

Remaining basis in KST $6,000

($15,000+$3,000-$12,000).

Therefore Kimberly’s remaining basis in KST after the distribution will be $6,000

B. Calculation to determine KST’s basis in the land Kimberly contributed after Kimberly receives this distribution

KST basis upon contribution $10,000

Add Kimberly’s §737 gain $3,000

($15,000-$12,000)

KST’s basis in land $13,000

($10,000+$3,000)

Therefore KST’s basis in the land Kimberly contributed after Kimberly receives this distribution is $13,000