Partner Shin received a distribution of $60,000 cash from the Shamrock Partnersh
ID: 2560871 • Letter: P
Question
Partner Shin received a distribution of $60,000 cash from the Shamrock
Partnership in complete liquidation of his partnership interest. If Shin's outside
basis immediately before the distribution was $90,000, and if the partnership has a
§ 754 election in effect, which of the following statements is true? (Assume the
partnership owns no "hot assets.")
a.Shin will recognize a $30,000 capital loss on the distribution.
b. The partnership will step-up the basis of its assets by $30,000.
c. The partnership is not allowed a step-up adjustment in this situation.
d. The partnership will step-up the basis of its capital and § 1231 assets by
$30,000.
e. None of the above.
Explanation / Answer
Solution: The partnership will step-up the basis of its capital and § 1231 assets by $30,000.
Explanation: §754 election; any gain will increase the basis of partnership and the loss is decreased with loss recognized by the distributee partnership