Alyce Owns a 30% Interest in a Continuing Partnership

question 86

Multiple Choice

Alyce owns a 30% interest in a continuing partnership. The partnership distributes a $35,000 year-end cash payment to Alyce. In a proportionate current (nonliquidating) distribution, the partnership also distributed property (basis of $20,000, fair market value of $30,000) to Alyce. Immediately before the distributions of cash and property, Alyce's basis in the partnership interest was $60,000. As a result of the distribution, Alyce recognizes:

• A) No gain or loss.
• B) Ordinary loss of $5,000.
• C) Capital loss of $5,000.
• D) Ordinary gain of $5,000.
• E) Capital gain of $5,000.

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Definitions:

FIFO

FIFO (First In, First Out) is an inventory valuation method where the oldest inventory items are recorded as sold first.

Fair Value

The estimated market value of an asset or liability, based on current market prices.

Cost of Goods Sold

An accounting term that represents the direct costs attributable to the production of the goods sold by a company.

Ending Inventory

The cumulative monetary value of products available for selling by the close of a fiscal period.