Reference no: EM132315250

Question

Samantha is a forty percent partner in Stevens LLC. Her tax basis in her partnership interest is $57,000. She received a non-liquidating distribution of real property (§1231 property to the partnership) with a fair market value of $100,000 and a tax basis of $65,000. Following the distribution, the partnership had remaining assets as follows:

Basis FMV

Cash $ 10,000 $ 10,000

Real Estate (§1231 Property):

Tract 1 54,000 70,000

Tract 2 65,000 45,000

Tract 3 71,000 95,000

$200,000 $220,000

i. Assume the LLC has a §754 election in effect. What will be the amount of the basis adjustment under §734(b)?

ii. How will the basis adjustment be allocated among the partnership's remaining properties?