Question 1 - Mark, Pete and Mickey are equal partners in the 2MP Partnership. At the beginning of the year, Mark's basis in 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 partnership interest?
c. How much your answers change if the distribution had been received by Mickey, rather than Pete?
Question 2 - Edna was a one-third partner in Oldgrad Partners until December 31, when her interst in the partnership was liquidated. Prior to the liquidation, her basis in her partnership interest was $45,000. She received $15,000 cash and property with a tax basis (to the partnership) of $50,000 and a fair market value of $64,000 in complete liquidation of her interest. The distribution was not a disproportionate distribution under Section 751 (b).
a. How much gain loss will Edana recognize upon receipt of the distribution?
b. What basis will she take in the property received from the partnership?