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Partnerships-Distributions, sales, and Exchanges

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Please help with the following problem. Provide step by step calculations.

Mark, Pete and Mickey are equal partners in the 2MP Partnership. At the beginning of the year, Mark's basisin his partnership interest was $15,000, Pete's basis was $10,000, and Mickey's basis was $20,000. The partnership reported taxable income of $30,000 (allocated equally among the partners). At year end, the partnership made a non-liquidating distribution of $25,000 cash to Pete.

a. how much gain must Pete recognize on receipt of the cash distribution?

b. what will be his remaining basis in his partneship interest?

c. how would your answers change if the distribution had been received by Mickey, rather than Pete

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Solution Preview

Question a
Compute Pete's basis before distribution
Net income/ 3 = 30,000/3 = 10,000
New basis = 10,000+10,000=20,000

Gain: cash distribution - basis = ...

Solution Summary

In this solution, distributions, sales and exchanges are examined for an equal partnership between Mark, Pete and Mickey. Step by step calculations are given.

$2.19