June is a 20% general partner in Monotoya Partners, a general partnership. Her t

Question

June is a 20% general partner in Monotoya Partners, a general partnership. Her tax basis in her partnership interest is $50,000, consisting of her $35,000 share of partnership capital and her $15,000 share of partnership liabilities. In complete liquidation of her partnership interest, she receives a distribution of real estate (Section 1231 property in the partnership's hands) with a tax basis of $95,000 and a fair market value of $150,000. The property was not encumbered by debt of any kind. How much gain will June recognize on receipt of the distribution?

Explanation / Answer

Any gain on sale of real estate will be recognised when the asset is sold. On sale if the property is sold at market value of 150000 then his interest less sale value is recognised as gain i.e (150000-50000) = 100000

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