Randy Owns a One-Fourth Capital and Profits Interest in the Calendar

question 91

Essay

Randy owns a one-fourth capital and profits interest in the calendar year RUSR Partnership. His adjusted basis for his partnership interest was $200,000 when he received a proportionate nonliquidating distribution of the following assets. $\begin{array}{lrr}&\text { Partnership's Basis in Asset} &\text { Asset's Fair Market Value }\\\text { Cash } & \$ 120,000 & \$ 120,000 \\\text { Inventory } & 60,000 & 90,000\end{array}$

a. Calculate Randy's recognized gain or loss on the distribution, if any. Explain.
b. Calculate Randy's basis in the inventory received.
c. Calculate Randy's basis for his partnership interest after the distribution.

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Definitions:

Operating Expenses

Costs associated with the day-to-day functions of a business, excluding costs of goods sold.

Gross Sales

The total sales revenue of a company without any deductions for returns, allowances, or discounts.

Cost Of Goods Sold

The immediate costs associated with manufacturing the products a company markets, including materials and workforce expenses.

Operating Cycle

The time period it takes for a company to purchase inventory, sell products, and receive cash from sales.