Eicho's Interest in the DPQ Partnership Is Terminated When Her

question 97

Essay

Eicho's interest in the DPQ Partnership is terminated when her basis in the partnership is $70,000. She receives a liquidating distribution of $20,000 cash and inventory with a $24,000 basis and a $40,000 FMV. She also receives, as part of the distribution, a desk that has a $100 basis and a $200 FMV to the partnership. What is her gain or loss, and what is her basis in the items received?

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Definitions:

Consideration Transferred

The total amount of cash, assets, or other resources given up by an acquiring entity to obtain control of another business in a business combination.

Fair Value

The monetary amount anticipated for the disposal of an asset or the fee for shifting a liability in a coordinated marketplace interaction on the appraisal day.

Bargain Purchase

The acquisition of an asset or company at a price significantly below its fair market value.

AASB 3

The Australian Accounting Standards Board's standard on Business Combinations, which provides the guidelines for accounting for the acquisition of businesses.