Mark Receives a Nonliquidating Distribution of $10,000 Cash and a Parcel

question 109

Essay

Mark receives a nonliquidating distribution of $10,000 cash and a parcel of land having an adjusted basis of $18,000 and a fair market value of $25,000.
a.Mark's basis in his partnership interest prior to the distribution is $50,000.
(1)How much income will the partnership recognize due to the distribution?
(2)How much income will Mark recognize due to the distribution?
(3)What is Mark's basis in his partnership interest after the distribution ?
(4)What is Mark's basis in the land?
b.Assume Mark's basis in his partnership interest is instead $22,000 and redetermine the responses to questions (1)through (4).

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Definitions:

Repainting

Repainting involves updating or applying a fresh coat of paint to an object or area to enhance its appearance or protect it from damage.

Straight-Line Depreciation

A method of calculating the depreciation of an asset where the expense is evenly allocated over its useful life.

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Cash Transaction

A financial exchange involving the immediate payment of cash for the purchase of goods or services.