Question

Ten years ago, Dudley contributed land to the Prosperity LLC. His basis in the land was $100,000. The fair market value at the contribution date was $115,000. This year, when the property's value was $200,000, the LLC distributed that property to partner Nicki. At that time, Dudley's basis in his LLC interest was $50,000 and Nicki's basis was $60,000. Assume that the partnership continues in existence and has no hot assets.

What gain or loss is recognized as a result of this distribution of precontribution gain property? What is Dudley's basis in his partnership interest following the distribution? What is Nicki's basis in the property received and her partnership interest following the distribution?

If an amount is zero, enter "0".

No gain or loss  is recognized on the distribution. As a result, Dudley's basis in his partnership interest is $_________. Nicki's basis in the property is $_______, and her basis in the partnership interest is $_______.

Answer 1

Pre Contribution gain :
Fair market Value at the time of distribution fair value is $115000, so gain will be $115000- $100000= $15000
Dudley's basis in his partnership following distribution
Partnership Interest means a partner's share of the profits and losses of a limited partnership and the right to receive distributions of partnership assets.
Dudley's basis in LLC Interest			50000
Nicki's basis in LLC Interest			60000
Total			110000
Dudley's share in the partnership is
50000/110000 =	45%
Fair value at the time of distribution			$200000
Dudley's basis in the partnership interest			90000
(200000*45%)
Nicki's partnership interest			55%
(60000/110000)
Basis in property received
Fair value at the time of distribution			$200000
Nicki's basis in the partnership interest			110000
(200000*55%)
No gain or loss  is recognized on the distribution. As a result, Dudley's basis in his partnership interest is $90000. Nicki's basis in the property is $110000, and her basis in the partnership interest is 55%.