Question

Required information Justin and Lauren are equal partners in the PJenn Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners have the following bases in their partnership interests: (Leave no answer blank. Enter zero if appplicable.) Partner Justin Lauren Outside Basis $ 25, see $ 25,500 On December 31 of the current year, the partnership makes a pro rata operating distribution of Partner Justin Lauren Distribution Cash $29, see Cash $21,000 Property 5 8,500 (FHV) (53,100 basis to partnership)

Answer 1

a
No gain is recognized from a distribution of cash or marketable securities that can easily be converted to cash, unless the distribution is more than the partner's outside basis, in which case, the excess is taxable as a capital gain.
Capital Gain = Cash Distribution – Partner's Outside Basis
Answer is 4000 capital gain				(29500-25500)
b
Answer is 0
c
Lauren
Cash distribution		21000
Property	(FMV)	8500	With adjusted basis 3100
When property is distributed to a partner, then the partnership must treat it as a sale at fair market value (FMV). The partner's capital account is decreased by the FMV of the property distributed.
Outside basis				25500	Given
Less: Cash Distribution				21000
				4500
Less: Adjusted basis in property				3100
				1400
Since Outside basis is more than cash and propery distribution there is no tax.
Answer is neither gain nor loss recognized
d
Lauren's basis
Basis in cash		21000
Basis in Property		3100
e
As with the cash distribution, if the FMV of the property exceeds the partner's outside basis in the partnership, then the partner's interest in the partnership is reduced to 0
CASH DISTRIBUTION		21000
FMV		8500
		29500
OUTSIDE BASIS		25500
Since Cash distribution+FMV is gretter than Outside basis therefore remaining basis is 0