Choice "A" is correct. Jody's basis in the distributed property is $30,000, Jody's remaining basis in the partnership after the cash distribution:
Jody's partnership basis | $ 50,000 | |
Cash distribution and Jody's basis in cash | (20,000) | |
| $ 30,000 | |
Property distribution and Jody's basis in the property | (30,000) | * |
Jody's partnership basis after distributions | $ 0 | |
* If the partner's basis in the partnership ($30,000) is less than the property's basis ($40,000), the partner's basis in the property is limited to her basis in the partnership ($30,000).Choice "d" is incorrect. $0 is Jody's basis in the partnership after the distributions, not her basis in the property.
Choice "b" is incorrect. The partner's basis in distributed property is equal to the partnership's basis in the distributed property, not the fair market value. In this instance, because the partnership's basis exceeds the partner's basis in the partnership, the partner's basis is limited.
Choice "c" is incorrect. If the partner's basis in the partnership is less than the property's basis, the partner's basis in the property is limited to her basis in the partnership. Remember, the cash distributed must be subtracted from the partner's basis first.
