Question

Adam and Alyssa are equal partners in the PartiPilo Partnership. The partners formed the partnership three years ago by contributing cash. Prior to any distributions. the partners have the following bases in their partnership interests:Partner Outside BasisAdam $12,000Alyssa $12,000
On December 31 of the current year, the partnership makes a pro-rata operating distribution of:Partner DistributionAdam Cash $16,000Alyssa Cash $8,000 Property $8,000 (FMV) ($6,000 basis to partnership)
Required:
a) What is the amount and character of Adam's recognized gain or loss?b) What is Adam s remaining basis in his partnership interest?c) What is the amount and character of Alyssa's recognized gain or loss?d) What is Alyssa s basis in the distributed assets?e) What is Alyssa s remaining basis in her partnership interest?

Answer 1

Answer and Explanation:

Partnership can be defined as a form of business which is often carried out by two or more people with the sole aim of making profit.

a) Adam receives only money in the distribution and the distribution exceeds his basis.

Particular Amount

Distribution $16,000

Less: Basis $12,000

Recognized Gain $4,000

b) Adam has $0 remaining basis in his partnership interest due to the fact that all the money or cash he received in the partnership distribution is allocated in outside basis and not within basis.

c) Alyssa has not recognized any gain or loss from the current distribution due to the fact that the cash Alyssa received in distribution is fully adjusted in the outside basis.

d) After adjusting the money received against the outside basis the remaining outside basis of $4,000 will be adjusted by property, which is why Alyssa will assign $4,000 basis to the property.

e)

Particular Amount

Basis $12,000

Less: cash distribution $8,000

Less: Property $4,000

Remaining basis $0

Therefore Alyssa remaining basis in her partnership interest will be $0