The XYZ Partnership Owns the Following Assets on December 31

question 72

Multiple Choice

The XYZ Partnership owns the following assets on December 31: A partner has a 20% interest with a basis of $6,000 in XYZ before receiving a liquidating distribution
$10,000 cash. XYZ Partnership has no liabilities. His recognized gain is

• A) $3,000 ordinary income.
• B) $4,000 capital gain.
• C) $3,000 ordinary income and $1,000 capital gain.
• D) $3,000 capital gain and $1,000 ordinary income.

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Definitions:

Preemption

A doctrine in law where higher authority laws take precedence over laws created by lower levels of government.

Cooperative Federalism

A concept where national, state, and local governments interact cooperatively and collectively to solve common problems, rather than making policies separately.

Home Rule

The power granted to local governments to govern themselves with minimal interference from higher levels of government.

Public-Works Projects

Infrastructure projects funded and implemented by the government for public use and benefit, such as roads, bridges, and water treatment facilities.