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Mark, Pete and Mickey are equal partners in the 2MP Partnership.
Mark, Pete and Mickey are equal partners in the 2MP Partnership. At the begininning 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?
How would your answers change change if the distribution had been received by Mickey, rather than Pete?Solution a:Computaiton of the Pete's basis before distributionGiven informationInterestMark$15,000Pete$10,000Mickey$20,000Taxable income$30,000Non liquidating distribution$25,000...