1. Randy owns a one-fourth capital and profits interest in the calendar-year RUSR Partnership. His adjusted basis for his partnership interest was $200,000 when he received a proportionate nonliquidating distribution of the following assets:

Partnership’s Basis in Asset Asset’s Fair Market Value

Cash $120,000 $120,000

Inventory 60,000 90,000

a. Calculate Randy’s recognized gain or loss on the distribution, if any. Explain.

b. Calculate Randy’s basis in the inventory received.

c. Calculate Randy’s basis for his partnership interest after the distribution.

2. Karli owns a 25% capital and profits interest in the calendar-year KJDV Partnership. Her adjusted basis for her partnership interest on July 1 of the current year is $200,000. On that date, she receives a proportionate nonliquidating distribution of the following assets:

	Partnership’s Basis in Asset	Asset’s Fair Market Value
Cash	$120,000	$120,000
Inventory	50,000	60,000
Land (held for investment)	70,000	100,000

a. Calculate Karli’s recognized gain or loss on the distribution, if any.

b. Calculate Karli’s basis in the inventory received.

c. Calculate Karli’s basis in land received. The land is a capital asset.

d. Calculate Karli’s basis for her partnership interest after the distribution.

3. Melissa is a partner in a continuing partnership. At the end of the current year, the partnership makes a proportionate, nonliquidating distribution to Melissa of $50,000 cash, inventory (basis of $22,000, fair market value of $20,000), and land (basis of $30,000, fair market value of $60,000). Melissa’s basis in the partnership interest was $90,000 before the distribution. What is Melissa’s basis in the inventory, land, and partnership interest following the distribution?

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4. In a proportionate nonliquidating distribution of his 30% interest in the MNO LLC, Neil received cash ($60,000), land (basis of $40,000 and value of $75,000), and unrealized receivables (basis of $0 and value of $22,000). In addition, Neil is relieved of his $40,000 share of the LLC’s liabilities. Neil’s basis in MNO (including his share of LLC liabilities) was $80,000 immediately prior to this distribution.

a. How much gain or loss does Neil recognize on this distribution?

b. What is Neil’s basis in the receivables and land he receives in the distribution?

c. What is Neil’s basis in the LLC interest following the distribution?

a. .

5. In a proportionate liquidating distribution of his 40% interest in the RST LLC, Stuart received cash ($100,000), land (basis of $60,000 and value of $90,000), and unrealized receivables (basis of $0 and value of $40,000). In addition, Stuart is relieved of his $80,000 share of the LLC’s liabilities. Stuart’s basis in RST (including his share of LLC liabilities) was $200,000 immediately prior to this distribution.

a. How much gain or loss does Stuart recognize on this distribution?

b. What is Stuart’s basis in the receivables and land he receives in the distribution?

6. In a proportionate liquidating distribution in which the partnership is liquidated, Marcus received cash of $60,000, inventory (basis of $10,000, fair market value of $12,000), and a capital asset (basis and fair market value of $22,000). Immediately before the distribution, Marcus’s basis in the partnership interest was $100,000.

a. How much gain or loss will Marcus recognize on the distribution?

b. What is Marcus’s basis in the inventory and the capital asset?

7. In a proportionate liquidating distribution in which the partnership is liquidated, Bill received cash of $120,000, inventory (basis of $6,000, fair market value of $8,000), and a capital asset (basis and fair market value of $16,000). Immediately before the distribution, Bill’s basis in the partnership interest was $90,000.

a. How much gain or loss will Bill recognize on the distribution?

b. What is Bill’s basis in the inventory and the capital asset?

8. Josh has a 25% capital and profits interest in the calendar-year GDJ Partnership. His adjusted basis for his partnership interest on October 15 of the current year is $300,000. On that date, the partnership liquidates and makes a proportionate distribution of the following assets to Josh.

Partnership’s Basis in Asset Asset’s Fair Market Value

Cash $ 70,000 $ 70,000

Inventory 120,000 150,000

a. Calculate Josh’s recognized gain or loss on the liquidating distribution, if any.

b. How would your answer to a. change if the partnership also distributed a small parcel of land it had held for investment to Josh? Assume the land has a $5,000 adjusted basis (FMV is $8,000) to the partnership.