Question

Jenny has a $54,000 basis in her 50% 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

Answer and Explanation:

The computation of the basis in the land and her remaining basis in JM after the distribution is shown below:

Basis in the land is equal to the basis to JM i.e $64,000

And, the remaining basis is

= Basis in her partnership interest + 50% contribution - basis to JM

= $54,000 + $15,000 - $64,000

= $5,000

We simply applied the above formula to find out the basis in the land and the remaining basis