The XYZ Partnership Owns the Following Assets on December 31

question 68

Multiple Choice

The XYZ Partnership owns the following assets on December 31: A partner has a 20% interest with a basis of $6,000 in XYZ before receiving a liquidating distribution of $10,000 cash. XYZ Partnership has no liabilities. His recognized gain is

• A) $4,000 capital gain.
• B) $3,000 capital gain and $1,000 ordinary income.
• C) $3,000 ordinary income.
• D) $3,000 ordinary income and $1,000 capital gain.

---

Definitions:

Olfactory Epithelium

A specialized epithelial tissue inside the nasal cavity involved in smell, where odorant molecules bind to receptor neurons, initiating the sense of smell.

Papillae

Small projections on the surface of the tongue that contain taste buds, which are sensitive to the chemical composition of foods and liquids.

Bulb

A rounded underground storage organ present in some plants, notable for its role in perennial growth and flowering.

Basic Quality

A fundamental characteristic or attribute that defines or greatly influences something's nature or essence.