Martin Has a Basis in a Partnership Interest of $100,000

question 11

Multiple Choice

Martin has a basis in a partnership interest of $100,000. At the end of the current year, the partnership distributed to Martin, in a proportionate nonliquidating distribution, cash of $10,000, inventory (basis to the partnership of $6,000 and fair market value of $12,000) , and land (basis to the partnership of $20,000 and fair market value of $15,000) . In addition, Martin's share of partnership debt decreased by $10,000 during the year. What basis does Martin take in the inventory and land and in the partnership interest following the distribution?

• A) $6,000 basis in inventory; $15,000 basis in land, $59,000 basis in partnership.
• B) $6,000 basis in inventory; $20,000 basis in land, $54,000 basis in partnership.
• C) $12,000 basis in inventory; $15,000 basis in land, $53,000 basis in partnership.
• D) $12,000 basis in inventory; $20,000 basis in land, $53,000 basis in partnership.
• E) $12,000 basis in inventory; $20,000 basis in land, $48,000 basis in partnership.

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Definitions:

Fair Values

The expected value from selling an asset or what it would cost to delegate a liability in an orderly exchange scenario with market participants on the designated assessment date.

Common Stock

A type of security that represents ownership in a corporation, granting shareholders voting rights and a share in the company's profits via dividends.

Acquisition

Acquisition refers to the process of obtaining control of another company or business entity through purchase, takeover, or another means, aimed at expanding operations or entering new markets.

Consolidated Retained Earnings

The cumulative amount of earnings not distributed as dividends to shareholders, reported in the consolidated financial statements of a parent company and its subsidiaries.