33. The ABCD partnership has four partners. Each partner’s adjusted basis in the
ID: 2534015 • Letter: 3
Question
33. The ABCD partnership has four partners. Each partner’s adjusted basis in the partnership interest owned by that partner was $40,000 on the first day of last year. The partnership reported net income for last year of $80,000 (there were no separately stated items to take into account). The partnership distributed pro rata to each partner $55,000 in cash plus identical parcels of land that each had a fair market value of $25,000 and a basis to the partnership of $10,000. What is each partner’s adjusted basis in the land distributed to the partner?
a. 0
b. $20,000
c. $15,000
d. $10,000
e. $5,000
Explanation / Answer
Correct answer is E
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Adjusted basis in partnership = $40,000
Cash received = $55,000
Balance = (55000 – 40000) = $15,000 Gain
Land received = $10,000
Includable income in each partner's gross income = $15,000 - $10,000 = $5,000
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