Answer:
PJenn Partnership
a. The amount and character of Justin's recognized gain or loss:
Justin has a recognized gain of $3,000 ($25,000 - $22,000). The character of Justin's recognized gain or loss must have substantial economic effect.
b. Justin's remaining basis in his partnership interest = $1,000 ($2,000/2) in the property distribution to the partnership.
c. The amount and character of Lauren's recognized gain or loss:
Lauren has a recognized gain of $3,000 ($25,000 - $22,000). The character of Justin's recognized gain or loss must have substantial economic effect.
d. Lauren's basis in the distributed assets is $22,000, which is her outside basis.
e.Lauren's remaining basis in her partnership interest = $1,000 ($2,000/2) in the property distribution to the partnership.
Explanation:
a) Data and Calculations:
Partner Outside Basis Partner Distribution
Justin $22,000 $25,000 cash
Lauren 22,000 $18,000 cash + $7,000 in property
Property $2,000 to Partnership
Justin and Lauren's recognized gain or loss is determined by the amount of the sale minus the partner's interest, which is often referred to as the partner's outside basis.
Justin's and Lauren's remaining basis in the partnership is the amount of the fair market value of property remaining after Lauren's share in the property.
