Ten Years Ago, Latesha Acquired a One- Third Interest in Dana

question 53

Multiple Choice

Ten years ago, Latesha acquired a one- third interest in Dana Associates, a partnership, for $26,000 cash. This year, Latesha's entire interest in the partnership is liquidated when her basis is $24,000. Dana's assets consist of the following: cash, $20,000; inventory with a basis of $46,000 and an FMV of $40,000. Dana has no liabilities. Latesha receives the cash of $20,000 in liquidation of her entire interest. What is Latesha's recognized loss on the liquidation of her interest in Dana?

• A) $4,000 long- term capital loss
• B) $4,000 long- term capital loss and $2,000 ordinary loss
• C) $4,000 short- term capital loss and $2,000 ordinary loss
• D) $0

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