Ask Question
13 May, 12:41

Petra's basis was $50,000 in the PAM Partnership interest just before she received a proportionate nonliquidating distribution consisting of land held for investment (basis of $40,000, fair market value of $60,000) and inventory (basis of $40,000, fair market value of $40,000). After the distribution, Petra's bases in the land and inventory, respectively, are:a.$40,000 and $0.

b.$10,000 and $40,000.

c.$25,000 and $25,000. d.$40,000 and $10,000.

e.$40,000 and $40,000.

+3
Answers (1)
  1. 13 May, 14:10
    0
    b.$10,000 and $40,000.

    Explanation:

    Under the ordering rules for distributions, cash is distributed first, then followed by unrealized receivables and inventory; other assets are distributed last.

    For Petra, the inventory is distributed first and takes a carryover basis of $40,000.

    This reduces Petra's basis to $10,000. The land is distributed next and takes the $10,000 remaining basis

    $50,000 (partnership interest) - $40,000 (inventory) = $10,000 (land distribution)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Petra's basis was $50,000 in the PAM Partnership interest just before she received a proportionate nonliquidating distribution consisting ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers