Beth Has an Outside Basis of $100,000 in the BJDE

question 77

Multiple Choice

Beth has an outside basis of $100,000 in the BJDE Partnership as of December 31 of the current year. On that date the partnership liquidates and distributes to Beth a proportionate distribution of $50,000 cash and inventory with an inside basis to the partnership of $10,000 and a fair market value of $16,000. In addition, Beth receives an antique desk (not inventory) that has an inside basis (and fair market value) of $5,000. None of the distribution is for partnership goodwill. How much gain or loss will Beth recognize on the distribution, and what basis will she take in the desk?

• A) $40,000 loss; $0 basis.
• B) $35,000 loss; $5,000 basis.
• C) $0 gain or loss; $5,000 basis.
• D) $0 gain or loss; $34,000 basis.
• E) $0 gain or loss; $40,000 basis.

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Definitions:

Electrical Activity

Movements of ions that create electrical impulses, fundamental for the functioning of nerves and muscles, including the heart and brain.

Electrodes

Conductive materials that allow electricity to enter or leave an object, substance, or region, commonly used in electrical circuits and medical devices.

Diaphragm

A large, dome-shaped muscle located at the base of the lungs that aids in the breathing process.

Chest

The front surface of the upper part of the human torso, containing the thoracic cavity and protecting the heart and lungs.