Question

Problem 11-35 (LO. 3) Jamie's basis in her partnership interest is $52,000. In a proportionate distribution in liquidation of the partnership, Jamie receives $2,000 cash and two parcels of land with bases of $10,000 and $18,000, respectively, each to the partnership. The partnership holds both parcels of land for investment, and the parcels have fair market values of $20,000 each. If there is no gain or loss or if an amount is zero, enter"0". a. How much gain or loss, if any, must Jamie recognize on the distribution? Jamie recognizes no gain or loss of $ 0 . As a result, Jamie's basis, in total, for the two parcels of land is 20,000 x Feedback Check My Wor Proportionate liquidating distributions consist of a single distribution or a series of distributions that result in the termination of the partner's entire interest in the partnership. If the partnership continues in existence after the partner's interest is liquidated, the rules of $ 736 govern the dassification of the liquidating payments. b. What basis will Jamie take in each parcel? Jamie's basis in the first property is $ and her basis in the second property is $ Feedback Chaty Work Incorrect c. If the land had been held as inventory by the partnership, what effect, if any, would it have on your responses to parts (a) and (b)? Jamie would have allocated basis of $ to the two parcels, and she would have realized and recognized a capital loss of Check My Work All work saved.

Answer 1

a)	Calculation of Gain / Loss on the distribution to Jamie
	Step : 1
		Jamie's share of distribution:	$: 52,000
		Actual Cash received:	$ : 2,000
		Balance to be received:	$: 50,000
	Step : 2	2 parcels of land of partnership received by Jamie for the balance					Workings:-
			Base Value	FMV	Allocation		(FMV of Land 1 / TTL Value Received) x ( Total Receivable)
		Land 1	$:10,000	$:20,000	$:25,000		=(20000/40000)*(50000) = 25000
		Land 2	$:20,000	$:20,000	$:25,000
							(FMV of Land 2 / TTL Value Received) x ( Total Receivable)
		DISTRIBUTION TOTAL	$:30,000	$:40,000	$:50,000		=(20000/40000)*(50000) = 25000
	balance = Nil
b)	jamie will recieve value $ 25,000 for each parcel for land
		Jamie's interest in partnership	$52,000
		Distribution:-
		Cash	($2,000)
		Land 1	($25,000)
		Land 2	($25,000)
		Total distribution received	($52,000)	balance = Nil
c)	If, the land had been held as inventory by the partnership,
		jamie's interest                                       =		$:52,000
		Less: Disstribution received:
		cash	$:2,000
		Land 1 book value	$:10,000
		Land 2 book value	$:20,000
		Total value received:		$:32,000
		Balance : (Gain / Loss) =		($:20,000)