Lonnie Davis has been a general partner in the Highland Partnership for many years and is also a sole proprietor in a separate business. To spend more time focusing on his sole proprietorship, he plans to leave Highland and will receive a liquidating distribution of $66,500 in cash and land with a fair market value of $132,500 (tax basis of $176,000). Immediately before the distribution, Lonnie’s basis in his partnership interest is $392,000, which includes his $85,500 share of partnership debt. The Highland Partnership does not hold any hot assets.
b. What is Lonnie’s basis in the land?