In a Proportionate Liquidating Distribution, Ashleigh Receives a Distribution of $30,000

question 83

Multiple Choice

In a proportionate liquidating distribution, Ashleigh receives a distribution of $30,000 cash, accounts receivable (basis of $0, fair market value of $40,000) , and land (basis of $40,000, fair market value of $50,000) . In addition, the partnership repays all liabilities, of which Ashleigh's share was $70,000. Ashleigh's basis in the entity immediately before the distribution was $60,000. As a result of the distribution, what is Ashleigh's basis in the accounts receivable and land, and how much gain or loss does she recognize?

• A)$0 basis in accounts receivable; $0 basis in land; $40,000 gain.
• B)$0 basis in accounts receivable; $30,000 basis in land; $0 gain or loss.
• C)$0 basis in accounts receivable; $40,000 basis in land; $0 gain or loss.
• D)$40,000 basis in accounts receivable; $20,000 basis in land; $0 gain.
• E)$40,000 basis in accounts receivable; $20,000 basis in land; $100,000 gain.

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Definitions:

Proprietor's Income

The income earned by the owner of a sole proprietorship, which consists of the profits generated by the business.

Production Factor

An input used in the manufacturing of goods or services, typically categorized into land, labor, and capital.

College

An educational institution or a constituent part of one that offers undergraduate and, in some cases, postgraduate degrees.

Marginal Product

The additional quantity of output produced by using one more unit of a given input.