Kristen and Harrison Are Equal Partners in the KH Partnership

question 85

Multiple Choice

Kristen and Harrison are equal partners in the KH Partnership. The partners formed the partnership 5 years ago by contributing cash. Prior to any distributions Harrison has a basis in his partnership interest of $44,000. On December 31, KH makes a proportionate operating distribution of $50,000 cash to Harrison. What is the amount and character of Harrison's recognized gain or loss and what is his remaining basis in KH?

• A) $0 gain, $0 basis.
• B) $6,000 capital gain, $0 basis.
• C) $6,000 capital loss, $0 basis.
• D) $6,000 capital gain, $44,000 basis.

---

Definitions:

Interest Rate R

Refers to the cost of borrowing money, often expressed as a percentage of the amount borrowed over a specific period.

NPV Calculation

Net Present Value Calculation; a method used to evaluate the profitability of an investment by comparing its present value of cash inflows and outflows over time.

Similar Investment

An investment in assets or projects that have similar risk levels, expected returns, or financial profiles.

Interest Rate

The cost, in the form of a percentage of the principal amount, charged by a lender to a borrower for accessing funds or assets.