The December 31 Balance Sheet of DBW, LLP, a Service-Providing

question 69

Essay

The December 31 balance sheet of DBW, LLP, a service-providing partnership, reads as follows. $$\begin{array} { l r r } & \text { Adjusted } \\& \text { Basis } & \text { FMV } \\\text { Cash } & \$ 180,000 & \$ 180,000 \\\text { Receivables } & -0- & 60,000 \\\text { Capital assets } & 90,000 & 120,000 \\\text { Total } & \$ 270,000 & \$ 360,000\\\\\text { Dana, capital } & \$ 90,000 & \$ 120,000 \\\text { Brooke, capital } & 90,000 & 120,000 \\\text { Whitney, capital } & 90,000 & \underline{120,000} \\\text { Total } & \$ 270,000 & \$ 360,000\\\hline\end{array}$$ The partners share equally in partnership capital, income, gain, loss, deduction, and credit. Capital is not a material income-producing factor to the partnership. On December 31, partner Dana who is an active managing partner in the partnership) receives a distribution of $120,000 cash in liquidation of her partnership interest under § 736. Dana's outside basis for the partnership interest immediately before the distribution is $90,000. How much is her gain or loss on the distribution and what is its character?

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Definitions:

Medulla

A part of the brainstem that controls vital body functions such as heart rate, breathing, and blood pressure.

Corpus Callosum

The large band of neural fibers connecting the two hemispheres of the brain, facilitating interhemispheric communication.

Pons

A part of the brainstem that plays a key role in controlling arousal, sleep, breathing, and relaying sensory information between the cerebrum and cerebellum.

Cerebellum

A part of the brain located at the back of the skull, important for coordinating movement and balance.