The RST Partnership makes a pro rata distribution of its assets to R in complete
ID: 2547676 • Letter: T
Question
The RST Partnership makes a pro rata distribution of its assets to R in complete liquidation of R's partnership interest. The distribution consists of $20,000 in cash and capital assets with a basis to the partnership of $15,000 and a fair market value of $30,000. At the time of the distribution, R's partnership basis is $40,000, which is what she paid for the interest one year earlier. If the partnership has no Section 754 election in effect, what is R's basis in the property distributed?
A. If no Section 732(d) adjustment is made, R's basis in the capital assets is $15,000. B. If no Section 732(d) adjustment is made, R's basis in the capital assets is $20,000. C. If no Section 732(d) adjustment is made, R's basis in the capital assets is $35,000. D. If no Section 732(d) adjustment is made, R's basis in the capital assets is $40,000.Explanation / Answer
If no Section 732(d) adjustment is made, R's basis in the capital assets is $20,000.
Total basis on transferring assets cannot exceed the partners basis in the firm. Since the total basis was $40,00 out of which $20,000 was paid in cash. and hence for the property, the basis will be $20,000 only.
B.If no Section 732(d) adjustment is made, R's basis in the capital assets is $20,000.
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