Derrick's Interest in the DEF Partnership Is Liquidated When His

question 61

Multiple Choice

Derrick's interest in the DEF Partnership is liquidated when his basis in the interest is $30,000. He receives a liquidating distribution of $20,000 cash and inventory with a basis of $8,000 and an FMV of $30,000. Derrick will recognize

• A)no gain or loss.
• B)$2,000 capital loss.
• C)$2,000 ordinary loss.
• D)$10,000 capital loss and $20,000 ordinary loss.

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Definitions:

Promotion Focus

A motivational orientation aimed at achieving positive outcomes and realizing aspirations or dreams.

Prevention Focus

A motivational orientation geared towards avoiding negative outcomes or maintaining safety and security.

Self-Perception Theory

A theory suggesting that individuals form their attitudes and emotions by observing their own behavior and context, especially when internal cues are difficult to interpret.

Self-Knowledge

The understanding or insight an individual has about themselves, including their beliefs, emotions, and motivations.