Question

Partnership XYZ distributed a piece of land in a nonliquidating distribution to Bob, a 50% partner, during the current taxable year. The land had an adjusted basis of $50,000 and a FMV at the date of the distribution of $180,000. Bob has been a partner for 10 years. He had contributed the land to the partnership at formation when its FMV and basis were both equal. He has a basis in the partnership of $40,000 at year end, without taking into consideration the effects of the distribution. Calculate the following:

a. Partnership XYZ's recognized gain (loss)
b. Bob's taxable gain (income)
c. Bob's basis in the property
d. Bob's basis in the partnership

Answer 1

a. Partnership XYZ's recognized gain (loss)

• recognized gain = fair market value - basis = $180,000 - $50,000 = $130,000

b. Bob's taxable gain (income)

• Bob's taxable income = $130,000 x 50% = $65,000

c. Bob's basis in the property

• Bob's new basis = $180,00 x 50% = $90,000

d. Bob's basis in the partnership

• Bob's basis in the partnership = $40,000 + $65,000 = $105,000