Question

Tyson is a 25% partner in the KT Partnership. On January 1, KT makes a proportionate distribution of $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000), and land with a fair value of $8,000 (inside basis of $12,000) to Tyson. KT has no liabilities at the date of the distribution. Tyson's basis in his KT partnership interest is $24,000. What is Tyson's basis in the distributed inventory and land?

Answer 1

Answer:

Tyson's basis in the distributed inventory = $8,000 and land = $12,000

Explanation:

Total basis value of assets received by Tyson = Cash + Inventory + Land

= $16,000 + $8,000 + $12,000 = $36,000

For this Tyson's basis of interest in partnership = $24,000

Thus Tyson's Basis in Inventory = $8,000

Tyson's basis for Land = $12,000

Note: the basis is book value and not the market value even in case it is less than book value.

Tyson's basis in the distributed inventory = $8,000 and land = $12,000