Question

Partnership XYZ distributed a piece of land in a nonliquidating distribution to Bob, a 50% partner, during the current taxable year. The land had an adjusted basis of $50,000 and a FMV at the date of the distribution of $180,000. Bob has been a partner for 10 years. He had contributed the land to the partnership at formation when its FMV and basis were both equal. He has a basis in the partnership of $40,000 at year end, without taking into consideration the effects of the distribution. Calculate items 1-4 using the information above. Enter the appropriate amounts in the designated cells below. Indicate negative numbers by using a leading minus (-) sign. If no entry is necessary, enter a zero (0). Item Amount
1. Partnership XYZ's recognized gain (loss)
2. Bob's taxable gain (income)
3. Bob's basis in the property
4. Bob's basis in the partnership

Answer 1

Answer:

Partnership XYZ

Item                                                                  Amount

1. Partnership XYZ's recognized gain (loss) $130,000

2. Bob's taxable gain (income)                       $65,000

3. Bob's basis in the property                        $90,000

4. Bob's basis in the partnership                 $105,000

Explanation:

a) Data and Calculations:

Bob's partnership interest = 50%

Adjusted basis of land = $50,000

Fair market value (FMV) = $180,000

Bob's basis in the partnership at year end = $40,000

Item                                                                   Amount

1. Partnership XYZ's recognized gain (loss) $130,000 ($180,000 - $50,000)

2. Bob's taxable gain (income)                      $65,000 ($130,000 * 50%)

3. Bob's basis in the property                       $90,000 ($180,000  * 50%)

4. Bob's basis in the partnership                 $105,000 ($65,000 + $40,000)