Question 1. Megan’s basis was $120,000 in the MYP Partnership interest just before she received a proportionate nonliquidating distribution consisting of land held for investmen

1. Megan’s basis was $120,000 in the MYP Partnership interest just before she received a proportionate nonliquidating distribution consisting of land held for investment (basis of $100,000, fair market value of $130,000) and inventory (basis of $80,000, fair market value of $70,000). After the distribution, Megan’s bases in the land and inventory are, respectively:

a. $100,000 (land) and $20,000 (inventory).

b. $120,000 (land) and $0 (inventory).

c. $50,000 (land) and $70,000 (inventory). d. $40,000 (land) and $80,000 (inventory).

e. None of the above.

2. Mark receives a proportionate nonliquidating distribution. At the beginning of the partnership year, the basis of his partnership interest is $100,000. During the year, he received a cash distribution of $40,000 and a property distribution (basis of $30,000, fair market value of $25,000). In addition, Mark’s share of partnership liabilities was reduced by $10,000 during the year. How much gain or loss does Mark recognize; what is his basis in the property he received; and what is his remaining basis in the partnership interest?

a. $25,000 loss; $25,000 basis in property; $0 remaining basis.

b. $30,000 loss; $30,000 basis in property; $0 remaining basis.

c. $0 gain or loss; $25,000 basis in property; $25,000 remaining basis.

d. $0 gain or loss; $30,000 basis in property; $20,000 remaining basis.

e. $0 gain or loss; $20,000 basis in property; $30,000 remaining basis.

3. Mack has a basis in a partnership interest of $200,000, including his share of partnership debt. At the end of the current year, the partnership distributed to Mack, in a proportionate nonliquidating distribution, cash of $20,000, inventory (basis to the partnership of $30,000 and fair market value of $40,000), and land (basis to the partnership of $40,000 and fair market value of $42,000). In addition, Mack’s share of partnership debt decreased by $12,000 during the year. What basis does Mack take in the inventory and land and in the partnership interest (including debt share) following the distribution?

a. $30,000 basis in inventory; $40,000 basis in land, $98,000 basis in partnership.

b. $30,000 basis in inventory; $42,000 basis in land, $110,000 basis in partnership.

c. $40,000 basis in inventory; $40,000 basis in land, $86,000 basis in partnership.

d. $40,000 basis in inventory; $42,000 basis in land, $98,000 basis in partnership.

e. $40,000 basis in inventory; $42,000 basis in land, $110,000 basis in partnership.

4. Frank receives a proportionate nonliquidating distribution from the AEF Partnership. The distribution consists of

$10,000 cash and property (adjusted basis to the partnership of $54,000 and fair market value of $60,000). Immediately before the distribution, Frank’s adjusted basis in the partnership interest was $50,000. His basis in the noncash property received is:

a. $0.

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