Carlos Receives a Proportionate Liquidating Distribution Consisting of $8,000 Cash

question 179

True/False

Carlos receives a proportionate liquidating distribution consisting of $8,000 cash and inventory with a basis to the partnership of $5,000 and a fair market value of $6,000. His basis in his partnership interest was $15,000 immediately before the distribution. Carlos assigns a basis of $7,000 to the inventory and recognizes no gain or loss.

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Definitions:

Right of Contribution

The legal right of a party to reclaim a portion of damages or losses from another party who is jointly liable.

Surety's Obligation

A legal responsibility assumed by a surety, guaranteeing the performance or obligations of another party.

Debt

Money owed by one party to another under the condition of repayment.

Surety

A financial guarantee by a third party (the surety) to cover a debtor's obligations in case of default.