The XYZ Partnership Owns the Following Assets on December 31

question 83

Multiple Choice

The XYZ Partnership owns the following assets on December 31: A partner has a 20% interest with a basis of $6,000 in XYZ before receiving a liquidating distribution of $10,000 cash. XYZ Partnership has no liabilities. His recognized gain is

• A)$4,000 capital gain.
• B)$3,000 capital gain and $1,000 ordinary income.
• C)$3,000 ordinary income.
• D)$3,000 ordinary income and $1,000 capital gain.

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Definitions:

Corporate Tax Rate

The portion of a company's earnings that is handed over to the government in the form of taxes.