Question: The FABB Partnership distributes a marketable security to 25 partner

The FABB Partnership distributes a marketable security to 25% partner Fred in complete liquidation of his interest in the partnership. Use the following facts to answer the questions that follow:
• The partnership’s basis in the security is $10,000, and its value is $20,000. The partnership did not own any of this particular security following the distribution.
• Fred’s basis in the partnership interest is $5,000 immediately prior to the distribution.
• Fred is a general partner, and capital is a material income-producing factor to the partnership.
• The partnership owns no hot assets.
a. How is the security classified under § 736?
b. What is the amount of the security distribution that is treated as a cash distribution?
c. How much gain does Fred report on the distribution?
d. What is Fred’s basis in the security he receives in the distribution?

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  • CreatedSeptember 09, 2015
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