Pelican partnership makes an operating distribution to prabakhar consisting of $30,000 in cash and capital assets worth $10,000 (partnership basis $8,000). immediately prior to the distribution prabhakar’s outside basis in the partnership was $35,000. what amount of gain will prabhakar recognize on the distribution, and what is prabhakar’s resulting outside basis in the partnership?

$0 and $0

Explanation:

Since the cash distribution is $30,000 and the Prabhakar outside basis in the partnership is $35,000 which reduced his basis by $5,000 ($35,000 - $30,000)

The Prabhakar outside basis in the partnership i.e $35,000 is more than the cash distribution i.e $30,000 which results in no gain and no outside basis in the partnership.

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