Question

Walter receives cash of $18,000 and land with a fair market value of $75,000 (adjusted basis of $50,000) in a current distribution. His basis in his partnership interest is $16,000 before the distribution. If an amount is zero, enter "0". a. What amount of gain must Walter recognize as a result of the current distribution?

Answer 1

Walter's recognized gain is $2,000

Step-by-step explanation:

Walter's gain/loss = cash distribution - basis in the partnership = $18,000 - $16,000 = $2,000

A partner (Walter) does not have to recognize income on a non-liquidating partnership distribution of property other than money. This land distribution must be treated as a sale and recorded at fair market value.