H\'s $30,000 partnership interest is terminated through a capital asset distribu

Question

H's $30,000 partnership interest is terminated through a capital asset distribution having a FMV of $50,000 (partnership basis of $40,000) and cash of $10,000. Assuming that an optional basis adjustment election if in effect, which of the following statements is true? A. H's basis in the capital asset is $20,000 B. H does not recognize gain or loss and takes a $30,000 basis in the capital asset received C. H recognizes a gain of $30,000 or D. The partnership increases the basis of its remaining assets by $30,000?

Explanation / Answer

A. True

Partnership Interest = $30000
Less; Cash Received = $10000
Basis available for land = $20000

B. False
Capital Asset Distrubuted = $40000
Less: Basis After Cash = $20000
Gain = $20000

C. False
Capital Asset Distrubuted = $40000
Less: Basis After Cash = $20000
Gain = $20000

D. False
Capital Asset Distrubuted = $40000
Less: H's Basis After Cash = $20000
Partnership can increase the
basis of its remaing assests by= $20000

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