Question

Jenny has a $82,500 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 $110,000 fair value and a $89,700 basis to JM. The land is encumbered with a $42,850 mortgage (JM's only liability). What is Jenny's basis in the land and her remaining basis in JM after the distribution

Answer 1

$89,700 land basis, $14,225 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 her basis in the land equal to the amount of $89,700 while are remaining basis in JM is the amount of $14,225, Calculated as:

Predistribution basis in JM $82,500

Add deemed contribution $21,425

(50%*$42,850)

Less: basis allocated to land ($89,700)

Remaining basis in JM $14,225

Therefore her basis in the land and her remaining basis in JM after the distribution are:

$89,700 land basis, $14,225 JM basis.