Question

The ABC partnership is a dealer in land. B, an attorney, receives a current distribution of land from ABC on June 1, 1997. The basis of the land to the partnership is $20 and its fair market value at the date of distribution is S21. B's basis in his partnership interest prior to the distribution is $50. 3. On July 1, 2001, B sells the land for $30. What is the amount and charac- ter of B's gain? a. In (a) above, assume that B sold the land on July 1, 2002. What is the amount and character of B's gain? b. Assume that ABC had purchased the land on June 1, 1996 for $20 and distributed it to B on June 1, 1997, and B sold it on July 1, 2001 for S30. What is the amount and character of B's gain? c.

Answer 1

a) Since the asset is held for more than 36 months in this case ( 49 months) , the asset has turned into a long term asset. The gain will be termed as a long term capital gain( LTCG). The amount of gain is $(30-21) =$9

b) Even when the land is held till July 1, 2002,( that is for 61 months) the asset is already being considered as a long term asset and will be treated as a long term capital gain.

c) In this case, the sale of the land would be treated as Short term capital gain(STCG).