Case 3

Greg owns a 50 percent share of the Rich and Greg RG law firm partnership. Both partners and the entity are on the calendar year for tax purposes. Greg's basis in the partnership interest at the beginning of the year is $300,000. The partnership's relevant data for year 1 includes the following:

• Partnership ordinary income $500,000
• Partnership municipal bond interest $100,000
• Greg capital; account withdrawals $250,000
• December 31st (end of year) cash distribution to the partners $150,000
• December 31st (end of year) property distribution to Greg: fair-market value $30,000
• Basis $25,000
• Partnership's liabilities January 1st (beginning of year) $20,000
• Partnership's liabilities December 31st (end of year) $100,000

Tasks:

1. What is Greg's basis in the partnership before the December 31st distributions?
2. What is Greg's basis in the property distributed?