Beth Has an Outside Basis of $100,000 in the BJDE

question 77

Multiple Choice

Beth has an outside basis of $100,000 in the BJDE Partnership as of December 31 of the current year. On that date the partnership liquidates and distributes to Beth a proportionate distribution of $50,000 cash and inventory with an inside basis to the partnership of $10,000 and a fair market value of $16,000. In addition, Beth receives an antique desk (not inventory) that has an inside basis (and fair market value) of $5,000. None of the distribution is for partnership goodwill. How much gain or loss will Beth recognize on the distribution, and what basis will she take in the desk?

• A) $40,000 loss; $0 basis.
• B) $35,000 loss; $5,000 basis.
• C) $0 gain or loss; $5,000 basis.
• D) $0 gain or loss; $34,000 basis.
• E) $0 gain or loss; $40,000 basis.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not affect future business decisions.

Alternatives

Different options or strategies available for achieving a goal or solving a problem, often considered during decision-making processes.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or business activity.

Monthly Rent

A regular payment made for the use of property or land on a monthly basis.