Derrick's Interest in the DEF Partnership Is Liquidated When His

question 61

Multiple Choice

Derrick's interest in the DEF Partnership is liquidated when his basis in the interest is $30,000. He receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and an FMV of $30,000. Derrick will recognize

• A)no gain or loss.
• B)$2,000 capital loss.
• C)$2,000 ordinary loss.
• D)$10,000 capital loss and $20,000 ordinary loss.

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Definitions:

Rationalizing

The process of justifying actions or decisions with logical reasons, even if those reasons are not the true underlying motivations.

Inner Circle Concept

A theory or model that suggests the importance of a close group or network of individuals that influence one's behavior, decisions, and success.

Future Favors

The concept of performing kind acts or services with the expectation of receiving help or support in return in the future.

Fudging

The act of manipulating or altering information, often to deceive or achieve a desired outcome.