Derek contributed a tract of undeveloped land to the Nightingale Partnership in 2012. He originally paid $20,000 for the property in 2002, but its value was $70,000 at the date of the contribution. In 2015, the partnership distributes another parcel of land to Derek; the land has a basis to the partnership of $30,000. The fair market value of the distributed property is $100,000 in 2015. Derek’s basis in his partnership interest is $60,000 immediately before the distribution.
a. How much gain or loss, if any, does Derek recognize on the distribution?
b. What is Derek’s basis in his partnership interest following the distribution?
c. What is Derek’s basis in the property he receives in the distribution?
d. After the distribution, what is the partnership’s basis in the property originally contributed by Derek?
e. Would your answers to (b), (c), and (d) change if Derek originally contributed the property to the partnership in 2003? Explain.