Quiz Chapter C10 Quiz Submit Quiz This Question 1 pt 3 of 5

Quiz: Chapter C:10 Quiz Submit Quiz This Question: 1 pt 3 of 5 (2 complete) This Quiz: 5 pts possible Trevor contributed investment land having a $21,000 basis and a S30,000 FMV along with S3,000 in money to the JKL Partnership when it was formed. Two years later, the partnership distributed the investment land Trevor had contributed to Ken, another partner. At the time of the distribution, the land had a $22,000 FMV, and Trevor and Ken\'s bases in their partnership interests were $22,000 and $29,000, respectively. Read the requirements Requirement a. What gain or loss must be recognized on the distribution, and who must recognize it? must recognize a S on the distribution. Requirement b. What are the bases for Trevor and Ken\'s interests in the partnership after the distribution? Trevor Ken Basis in partnership interest after the distribution Requirement c. What is Ken\'s basis in the distributed land? Ken\'s basis in the distributed land is Choose from any list or enter any number in the input fields and then continue to the next question

Solution

A.

The gain or loss that is recognized must be made by trevor, since his basis has changed since the distribution of the land to ken. He will recognize a gain equal to the difference of the basis of the land before the distribution from the fair market value at the time of distribution.

Trevor recognize a gain of $1000 (22000-21000)

B.

1.Trevor now has a base in partnership interest of

= gain+interest

=1000+22000

=23000

2. Ken has no gain recognized so his in partnership interest remains at $29000

C.

Ken\'s basis in the distributed land is limited to the basis of the land for Trevor. This means that Ken\'s basis in the land is $22000, since Trevor recognized a gain of $1000 to add onto his $21000 basis in the land.