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Scott Is a 50 Percent Partner in the LS Partnership

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Essay

Scott is a 50 percent partner in the LS Partnership. Scott has a basis in his partnership interest of $102,000 at the end of the current year, prior to any distribution. On December 31, Scott receives an operating distribution of $10,800 cash and a parcel of land with a $30,000 fair market value and a $30,000 basis to the partnership. LS has no debt or hot assets. What is the amount and character of Scott's recognized gain or loss? What is Scott's basis in the distributed property? What is Scott's ending basis in his partnership interest?


Definitions:

Production Function

A mathematical equation that describes the maximum output that can be produced with a given set of inputs, such as labor and capital.

Output

Refers to the total amount of goods or services produced by an entity in a given period.

Production Function

A mathematical relationship that describes the maximum amount of output that can be produced from a given set of inputs under certain technology.

Returns To Scale

The rate at which production output increases as a result of a proportional increase in all inputs or resources.

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