Lisa has a $25,000 basis in her partnership interest before receiving a current distribution of $4,000 cash and land with a $30,000 FMV and a $14,000 basis to the partnership. Assume that any distribution involving Sec. 751 property is pro rata, that any precontribution gains have been recognized before the distribution, and that no Sec. 754 election is in effect.
a. Determine Lisa’s recognized gain or loss, Lisa’s basis in distributed property, and Lisa’s ending basis in her partnership interest.
b. How does your answer to Part a change if the partnership’s basis in the land is $24,000 instead of $14,000?
c. How does your answer to Part a change if Lisa receives $28,000 cash instead of $4,000 (along with the land)?
d. How does your answer to Part a change if, in addition to the cash and land, Lisa receives inventory with a $25,000 FMV and a $10,000 basis and receivables with a $3,000 FMV and a zero basis?
e. Suppose instead that Lisa receives the distribution in Part a from a C corporation instead of a partnership. The corporation has $100,000 of E&P before the distribution, and Lisa’s stock basis before the distribution is $25,000. What are the tax consequences to Lisa and the C corporation?
f. This part can be answered only after the student studies Chapter 11 but is placed here to allow comparison with Parts a and e. Suppose instead that Lisa receives the distribution in Part a from an S corporation instead of a partnership. Lisa is a 50% owner in the corporation, and her stock basis before the distribution is $25,000. What are the tax consequences to Lisa and the S corporation?