Brittany Receives a Nonliquidating Distribution of $48,000 Cash from Her

question 136

Multiple Choice

Brittany receives a nonliquidating distribution of $48,000 cash from her partnership.Brittany's basis in her partnership interest prior to the distribution is $25,000.What are the tax consequences of the distribution?

• A)$48,000 ordinary income; $25,000 partnership basis
• B)$48,000 nontaxable return of capital,($23,000)partnership basis
• C)$25,000 nontaxable return of capital,capital gain of $23,000,$0 partnership basis
• D)$25,000 nontaxable return of capital,ordinary income of $23,000,$0 partnership basis

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Definitions:

Direct Manufacturing Cost

Expenses that are directly attributable to the production of goods, including direct labor and materials costs.

Differential Costs

The difference in total costs between two alternatives, helping in decision-making processes where alternatives are being considered.

Sunk Costs

Costs that have already been incurred and cannot be recovered or altered by future actions.

Sunk Cost

Refers to money that has already been spent and cannot be recovered, which should not influence future business decisions.