How will this distribution be treated for tax purposes

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Partner X, a 1/3 partner in XYZ Partnership, needs a distribution from the partnership for some unexpected bills. The partnership, however, does not have any extra cash to distribute.

It will distribute to the partner land that has a value of $30,000 and a basis to the partnership of $25,000. X's basis in his partnership interest is $45,000.

a. How will this distribution be treated for tax purposes?

b. Assume alternatively, that the partnership sells the land for its fair market value and distributes the cash to Partner X. What are the tax consequences of the sale and distribution?

Reference no: EM13539862

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