Tyson, a One-Quarter Partner in the TF Partnership, Receives a Proportionate

question 54

Essay

Tyson, a one-quarter partner in the TF Partnership, receives a proportionate distribution to liquidate his partnership interest on January 1. The distribution consists of $70,000 cash and inventory with a fair value of $40,000 (inside basis is $22,000). Tyson's outside basis is $105,000, including his $10,000 share of TF's liabilities. What is the amount and character of Tyson's recognized gain or loss? What is Tyson's basis in the distributed inventory?

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Definitions:

Innocent Landowners

Individuals who own property without knowledge of any environmental contaminations or violations present on the land.

Toxic Substances Control Act

A United States law, enacted in 1976, designed to regulate the introduction of new or previously existing chemicals.

Manufacture

The process of converting raw materials or components into finished goods through the use of labor, machinery, tools, and chemical or biological processing.

New Chemicals

Substances that have been recently developed or discovered and have not been previously identified or used in particular applications or industries.