Question

Jenny has a $54,000 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 $80,000 fair value and a $64,000 basis to JM. The land is encumbered with a $30,000 mortgage (JM's only liability). What is Jenny's basis in the land and her remaining basis in JM after the distribution?

Answer 1

Land Basis = $64,000

JM Basis = $5,000

Step-by-step explanation:

As per the data given in the question,

Outside basis = $50,000

Carryover basis of land = $64,000

Land encumbered with mortgage = $30,000

Partnership interest = 50%

So her basis increased by = $30,000 × 50%

= $15,000

Total increased basis = $54,000 + $15,000

=$69,000

As per the following formula,

Basis left in partnership interest = Total basis - Carryover basis of land

= $69,000 - $64,000

= $5,000