Question 1

A partner with an outside basis of $50,000 receives a nonliquidating distribution of $20,000 cash and land (Basis to partnership $40,000, FMV $60,000). What is the partner's basis in the land received?

Accepted Answer

1. Reduce outside basis by cash ($50k - $20k = $30k). 2. Assign basis to property. General rule is carryover ($40k), but limited to remaining outside basis ($30k). Basis in land = $30k.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Giving the land its full carryover basis ($40k) despite insufficient outside basis.

A partner with an outside basis of $50,000 receives a nonliquidating distribution of $20,000 cash and land (Basis to partnership $40,000, FMV $60,000). What is the partner's basis in the land received?

How to approach this question

Full Answer

Common mistakes

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