In a Proportionate Liquidating Distribution in Which the Partnership Is

question 158

Essay

In a proportionate liquidating distribution in which the partnership is liquidated,Marcus received cash of $60,000,inventory (basis of $10,000,fair market value of $12,000),and a capital asset (basis and fair market value of $22,000).Immediately before the distribution,Marcus's basis in the partnership interest was $100,000.
a.How much gain or loss will Marcus recognize on the distribution?
b.What is Marcus's basis in the inventory and the capital asset?

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Definitions:

Initial Value Method

An accounting approach for investments where the investment is recorded at its original cost without subsequent adjustments for changes in market value.

Equity Method

A method of accounting for investments where the investor's share of the investee's profits or losses is recognized in the investor's income statement.

Investment in Pitts Co.

The allocation of resources, typically financial, into Pitts Company with the expectation of generating a future financial return.

Goodwill

The excess value paid over the net assets of a company during acquisition, reflecting attributes like brand reputation and customer loyalty.