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

question 10

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

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