Gil’s outside basis in his interest in the GO Partnership is $100,000. In a proportionate nonliquidating distribution, the partnership distributes to him cash of $30,000, inventory (fair market value of $40,000, basis to the partnership of $20,000), and land (fair market value of $90,000, basis to the partnership of $40,000). The partnership continues in existence.
a.Does the partnership recognize any gain or loss as a result of this distribution? Explain.
b.Does Gil recognize any gain or loss as a result of this distribution? Explain.
c.Calculate Gil’s basis in the land, in the inventory, and in his partnership interest immediately following the distribution.
Answer:
- Does the partnership recognize any gain or loss as a result of this distribution?
Answer:
The partnership recognizes no gain or loss as a result of the distribution.
B
Does Gil recognize any gain or loss as a result of this distribution? Explain
Answer:
We could say that this is proportionate non liquidating distribution so Gil’s should only consider the gain if cash received is exceeding its outside basis. Gil’s should only consider the loss in the limited situation ,and only if his interest in the partnership is terminated. Therefore, we could say that ,Gil has no recognized gain or loss
C
Calculate Gil’s basis in the land, in the inventory, and in his partnership interest immediately following the distribution.
Answer:
-Gil should takes a basis in the inventory equal to his basis of partnership or the inventory, or $20000.His $100,000 basis in the partnership is reduced first by the $30,000 cash distribution, then by the $20,000 inventory distribution.-
Gil should takes a basis in the inventory equal to his basis of partnership for land as basis in the land, or $40,000. The land distribution reduces his basis in the partnership interest to $30,000
