Question

Marcella has a $65,000 basis in her 50% partnership interest in the JM Partnership before receiving any distributions. This year JM makes a proportionate currentdistribution to Marcella of $10,000 cash and inventory with an $80,000 fair value and a $40,000 basis to JM. What is Marcella's basis in the inventory and her remaining basis inJM after the distribution?A) $40,000 inventory basis, $0 JM basis.B) $80,000 inventory basis, $15,000 JM basis.C) $40,000 inventory basis, $15,000 JM basis.D) $80,000 inventory basis, $0 JM basis.

Answer 1

Answer:

C) $40,000 inventory basis, $15,000 JM basis.

Explanation:

JM distributed $80,000 worth of inventory, since Marcella has a 50% partnership interest, then half of the inventory belongs to her, $40,000 (= $80,000 / 2).

Since Marcella also received $10,000 in cash from JM, then her remaining basis in the partnership is:

$65,000 - $40,000 - $10,000 = $15,000