The explanations on these partnership questions seem to conflict. Thoughts?
Day's adjusted basis in LMN Partnership interest is $50,000. During the year, Day received a nonliquidating distribution of $25,000 cash plus land with an adjusted basis of $15,000 to LMN and a FMV of $20,000. How much is Day's basis in the land?
a. $10,000
b. $20,000
c. $25,000
d. $15,000
Answer D. In a nonliquidating distribution, the partner takes the partnership basis for assets distributed. This basis cannot exceed the partner's partnership interest.
Owen's tax basis in Regal Partnership was $18,000 at the time Owen received a nonliquidating distribution of $3,000 cash and land with an adjusted basis of $7,000 to Regal and a FMV of $9,000. Regal did not have unrealized receivables, appreciated inventory, or properties that had been contributed by its partners. Disregarding any income, loss, or any other parthership distribution for the year, what was Owen's tax basis in Regal after the distribution?
a. $9,000
b. $8,000
c. $7,000
d. $6,000
Choice B. is correct. In a nonliquidating distribution the partner's basis is reduced first by the amount of cash received and then by the adjusted basis of any property received.
What am I missing here? If you apply the logic in question 1 to question 2 you get $7,000 not $8,000.
4 for 4
FAR 85
AUD 94
BEC 86
REG 90