Pam has a $26,000 basis (including her share of debt) in her 50 percent partners

Question

Pam has a $26,000 basis (including her share of debt) in her 50 percent partnership interest in the Meddoc partnership before receiving any distributions. This year Meddoc makes a current distribution to Pam of a parcel of land with a $45,100 fair market value and a $30,400 basis to the partnership. The land is encumbered with a $12,800 mortgage (the partnership’s only liability).

a. What is the amount and character of Pam’s recognized gain or loss?

b. What is Pam’s basis in the land?
c. What is Pam’s remaining basis in her partnership interest?

Explanation / Answer

Answer:

a. Pam must consider the effects of debt changes before determining the effects of the distribution. Pam is treated as making a net contribution of cash to the partnership of $6,400, the difference between the full mortgage of $12,800 and her allocated share of the debt of $6,400. This deemed contribution increases Pam’s basis in Meddoc from $26,000 to $32,400. Pam does not recognize any gain or loss on the current distribution.

b. Pam takes a carryover basis in the land equal to $30,400.

c. Pam’s outside basis in the partnership after the distribution is as follows:

Basis in Meddoc                               = $26,000

Plus: Deemed contribution             = $ 6,400

Less: Land                                         = $(30,400)

Remaining basis in Meddoc           = $   2,000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.