In a Proportionate Liquidating Distribution, Sam Receives a Distribution of $30,000

question 171

Multiple Choice

In a proportionate liquidating distribution, Sam receives a distribution of $30,000 cash, accounts receivable (basis of $0, fair market value of $50,000) , and land (basis of $20,000, fair market value of $50,000) . In addition, the partnership repays all liabilities of which Sam's share was $40,000. Sam's basis in the entity immediately before the distribution was $120,000. As a result of the distribution, what is Sam's basis in the accounts receivable and land, and how much gain or loss does he recognize?

• A) $0 basis in accounts receivable; $50,000 basis in land; $0 gain or loss.
• B) $0 basis in accounts receivable; $90,000 basis in land; $0 gain or loss.
• C) $50,000 basis in accounts receivable; $40,000 basis in land; $0 gain or loss.
• D) $50,000 basis in accounts receivable; $50,000 basis in land; $50,000 gain.
• E) $0 basis in accounts receivable; $70,000 basis in land; $30,000 loss.

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Definitions:

Dependent Variable

The variable in an experiment that is expected to change as a result of manipulations made to the independent variable.

Dependent Variable

In scientific research, the variable that is being tested and measured; it is expected to change as a result of variations in the independent variable.

Independent Variable

The variable that is changed or controlled in a scientific experiment to test the effects on the dependent variable.

Independent Variables

In experimental research, variables that are manipulated or controlled by the researcher to study their effect on dependent variables.