Ariel Receives from Her Partnership a Nonliquidating Distribution of $9,000 $$\begin{array} {| l | l| } \hline\text { Income recognized } & \text { Basis in land } \\\hline \$ 0 & \$ 20,000\\\hline\end{array}$$

question 5

Multiple Choice

Ariel receives from her partnership a nonliquidating distribution of $9,000 cash plus a parcel of land.The partnership had purchased the land five years ago for $20,000,but it is worth $28,000 at the time of the distribution.Ariel's predistribution basis is $17,000.How much income will Ariel recognize due to the distribution,and what is her basis in the land?

• A) \[\begin{array} {| l | l| }
• \hline\text { Income recognized } & \text { Basis in land } \\
• \hline \$ 0 & \$ 20,000\\\hline
• \end{array}\]
• B) \[\begin{array} {| l | l |}
• \hline\text { Income recognized } & \text { Basis in land } \\
• \hline \$ 0 & \$ 8,000\\\hline
• \end{array}\]
• C) \[\begin{array} {| l | l| }
• \hline\text { Income recognized } & \text { Basis in land } \\
• \hline \$ 12,000 & \$ 20,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} {| l | l| }
• \hline\text { Income recognized } & \text { Basis in land } \\
• \hline \$ 20,000 & 28,000 \\
• \hline
• \end{array}\]

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Definitions:

Cumulative Preferred Stock

A type of preferred stock that entitles its holders to receive dividends in arrears before any dividends can be distributed to common stockholders, with missed dividends accumulating.

Net Income

The financial gain of a company post deduction of taxes and all costs from its revenue.

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and a share in the company's profits through dividends.

Basic Earnings

Typically refers to basic earnings per share, which is a measure of the amount of profit attributable to each outstanding share of a company's common stock.