The Desert Partnership Makes a Proportionate Distribution of Its Assets

question 9

Multiple Choice

The Desert Partnership makes a proportionate distribution of its assets to Kenneth, in complete liquidation of his partnership interest.The distribution consists of $60,000 in cash and capital assets with a basis to the partnership of $110,000 and a fair market value of $160,000.None of the payment is for partnership goodwill.At the time of the distribution, Kenneth's partnership basis is $140,000 and the partnership has no liabilities and no "hot assets." If the partnership makes an optional basis adjustment election on a timely filed return, it recognizes:

• A)Capital gain of $30,000 and increases the basis of its remaining assets by $30,000.
• B)Capital loss of $30,000 and decreases the basis of its remaining assets by $30,000.
• C)No gain or loss and increases the basis of its remaining assets by $30,000.
• D)No gain or loss and decreases the basis of its remaining assets by $30,000.
• E)None of the above.

---

Definitions:

Soluble

Capable of being dissolved in a solvent, such as a liquid, especially water.

Water

A polar inorganic compound that is at room temperature a tasteless and odorless liquid, which is nearly colorless apart from an inherent hint of blue.

Tamiflu

An antiviral medication used to treat and prevent influenza, specifically targeting the influenza virus and inhibiting its reproduction.

Antiinfluenza Drug

A medication designed to treat or prevent the influenza virus infection by inhibiting its replication cycle.