Last Year, Miguel Contributed Nondepreciable Property with a Basis of $50,000

question 1

Multiple Choice

Last year, Miguel contributed nondepreciable property with a basis of $50,000 and a fair market value of $75,000 to the Starling Partnership in exchange for a 25% interest in the partnership. In the current year, he receives a nonliquidating distribution from the partnership of other property with a basis to the partnership of $50,000 and a fair market value of $62,000. The basis in his partnership interest at the time of the distribution was $60,000. How much gain or loss does Miguel recognize on the distribution? (Assume no other distributions have been made to Miguel, the property he originally contributed is still owned by the partnership, and this is not a disguised sale transaction.)

• A)$0 gain or loss.
• B)$2,000 loss.
• C)$2,000 gain.
• D)$8,000 gain.
• E)$10,000 gain.

---

Definitions:

Democratic Party

One of the two major contemporary political parties in the United States, traditionally associated with progressive and liberal policies.

Fifteenth Amendment

An amendment to the United States Constitution, ratified in 1870, that prohibits the federal government and each state from denying a citizen the right to vote based on that citizen's "race, color, or previous condition of servitude."

Democratic State Primaries

A process by which the Democratic Party in the United States selects its candidates for various elected positions in government.

Smith V. Allwright

A landmark 1944 US Supreme Court decision that ended the practice of "white primaries" by declaring it unconstitutional, thus allowing African Americans to vote in primary elections.