Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $1
ID: 2515891 • Letter: R
Question
Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $15,000 cash, inventory with a fair value of $20,000 (inside basis of $10,000), and a parcel of land with a fair value of $10,000 (inside basis of $5,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in RD is $37,000. What is Randolph's basis in the distributed inventory and land?
Multiple Choice
$10,000 inventory, $10,000 land.
$10,000 inventory, $5,000 land.
$20,000 inventory, $10,000 land.
$10,000 inventory, $12,000 land.
Explanation / Answer
Answer is $10,000 inventory, $12,000 Land Randolph's will first allocate his outside bases to the distributed asset equal to amount to RD's bases($37000), and then remaining bases will be allocated to assets other than cash and hot assets with unrealized appreciation. After that remaining basis is allocated to assets other than cash and hot assets on the basis of their relative value. So Randolph's basis in distributed assets will be $15000 cash, $10000 inventory, and $12000 land.
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