Berdine has a basis of $32,000 in her partnership interest and receives land wit

Question

Berdine has a basis of $32,000 in her partnership interest and receives land with an adjusted basis to the partnership of $78,000 in termination of her interest. The partnership has no hot assets.

a. Under the proportionate liquidating distribution rules, what is Berdine’s basis in the distributed land? $_________

b. If an optional § 754 adjustment-to-basis election is in effect, by what amount does the partnership increase the basis of its remaining property? $_________

c.  If that adjustment is allocated to depreciable property, to whom does the partnership allocate the resulting depreciation deductions?

Explanation / Answer

a. Under the proportionate liquidating distribution rules, Berdine’s basis in the distributed land is $32000

b. If an optional § 754 adjustment-to-basis election is in effect, the partnership increase the basis of its remaining property?by $46000 (78000-32000)

c.  If that adjustment is allocated to depreciable property, the partnership allocate space the resulting depreciation deductions to Berdine and not to remaining partners (In the case of a property distribution in liquidation of a partner’s interest, the general rule can result in discrepancies in gain recognition to the remaining partners)

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