The adjusted basis of Peter Palmer’s partnership interest is $50,000. In complet

Question

The adjusted basis of Peter Palmer’s partnership interest is $50,000. In complete liquidation of his interest in the partnership, Peter receives $15,000 in cash, inventory items having an adjusted basis to the partnership of $20,000 and a fair market value of $22,000, and two parcels of land. Parcel I has an adjusted basis to the partnership of $18,000 and a fair market value of $15,000 and Parcel II has an adjusted basis to the partnership of $12,000 and a fair market value of $10,000. What is Peter’s basis in each of the two parcels of land?

a. Parcel 1, $6,000; Parcel 2, $9,000

b. Parcel 1, $3,000; Parcel 2, $12,000

c. Parcel 1, $12,000; Parcel 2, $3,000

d. Parcel 1, $9,000; Parcel 2, $6,000

Explanation / Answer

Adjusted Basis of Peter Palmer's Interest: $50,000

Less: Adjusted Basis of inventory and cash: $35,000

Adjusted value of Peter Share of two parcels of land: $15,000

Ratio of Parcel 1 : Parcel II is 9:6 ($18,000 : $12,000)

Adjusted value of Parcel i : $30,000 * 9/15 = $9,000

Adjusted value of Parcel II : $30,000 * 6/15 = $6,000

So, Correct option is d.

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