Question 1

A partnership distributes cash of $10,000 and property with a basis of $15,000 (FMV $20,000) to a partner in a non-liquidating distribution. The partner's outside basis before distribution was $22,000. What is the partner's basis in the received property?

Accepted Answer

Ordering Rule: 1. Reduce basis by Cash ($22k - $10k = $12k). 2. Property takes carryover basis ($15k) LIMITED to remaining outside basis ($12k).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Reducing basis by property first, or assigning FMV to the property.

A partnership distributes cash of $10,000 and property with a basis of $15,000 (FMV $20,000) to a partner in a non-liquidating distribution. The partner's outside basis before distribution was $22,000. What is the partner's basis in the received property?

How to approach this question

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