Suzy Owns a 30% Interest in the JSD LLC

question 159

Multiple Choice

Suzy owns a 30% interest in the JSD LLC.In liquidation of the entity, Suzy receives a proportionate distribution of $30,000 cash, inventory (basis of $16,000, fair market value of $18,000) , and land (basis of $25,000, fair market value of $30,000) .Suzy's basis in the entity immediately before the distribution was $80,000.As a result of the distribution, what is Suzy's basis in the inventory and land, and how much gain or loss does she recognize?

• A)$0 basis in inventory; $25,000 basis in land; $0 gain or loss.
• B)$16,000 basis in inventory; $34,000 basis in land; $0 gain or loss.
• C)$16,000 basis in inventory; $25,000 basis in land; $9,000 loss.
• D)$18,000 basis in inventory; $32,000 basis in land; $0 gain.
• E)$25,000 basis in inventory; $25,000 basis in land; $0 gain or loss.

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Definitions:

Excise Tax

A tax levied on specific goods, services, or transactions, often imposed on alcohol, tobacco, and gasoline.

Supply Curve

A graphical representation showing the relationship between the price of a good and the amount of it that suppliers are willing to produce and sell.

Perfectly Inelastic

A scenario where the demand for a good does not change in response to changes in price, represented by a vertical demand curve.

Excise Tax

A tax charged on specific goods, such as tobacco and alcohol, usually to discourage their use and generate revenue.