Question

Three years? ago,Vito joined the VL Partnership by contributing land with a $6,000 basis and a $20,000 FMV. On January 15 of the current? year,Vito has a basis in his partnership interest of $15,000?,and none of his precontribution gain has been recognized. On January? 15,Vito receives a current distribution of a property other than the contributed land with a $13,000 basis and a $20,000 FMV.

Requirements

a.	Does Vito recognize any gain or loss on the? distribution?
b.	What is Vito?'s basis in his partnership interest after the? distribution?
c.	What is the? partnership's basis in the land Vito contributed after Vito receives this? distribution?

Answer 1

In general, when you contribute property to a partnership in exchange for partnership interest you do not recognize gain or loss on the contribution. The basis you had in the property becomes both the basis the partnership gets in the property and the basis you get in the partnership interest you receive. Now if you contribute a land valued at $20000 FMV to your partnership with a basis to you of $6000 in exchange for a $15000 partnership interest, you will have no gain on the contribution. Your basis in the interest you receive and partnership’s basis in the land are both $15000.

You have no gain on the distribution because it does not exceed your basis in her interest. Your basis, however, is reduced by the $13000 distribution from $15000 to $2000.

Under the above rules, gain will be recognized where the debt relief exceeds the contributing partner’s total basis in his interest.

(Assume that $ 15000 basis interest are additional to land basis of $6000)

ANS 1 :- no Vigo not receive any gain or loss on the distribution.

ANS 2 :- after distribution Vigo has a basis remain $2000($15000-$13000) in addition to land basis of $6000

ANS 3 :- after distribution land basis will remain $6000 because distribution is other than land distribution hence it remain unaffected.