Brian Is a 25% Partner in the BC Partnership

question 85

Multiple Choice

Brian is a 25% partner in the BC Partnership.On January 1,BC distributes $20,000 cash and land with a $16,000 fair value (inside basis $8,000) to Brian.BC has no liabilities at the date of the distribution.Brian's basis in BC is $16,000.What is the amount and character of Brian's gain or loss on the distribution?

• A) $0.
• B) $4,000 capital gain.
• C) $12,000 capital gain.
• D) $20,000 capital gain.

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Definitions:

Diminishing Returns

A rule that implies that after reaching a certain threshold, the profit rate from investing more into a specific sector won't keep rising unless there are changes in other contributing factors.

Production Function

An equation that describes the maximum output that can be achieved with a given set of inputs.

Labor

The use of human mental and physical efforts in the process of producing goods and offering services.

Average Total Cost

The average cost per unit of output, calculated by dividing the total production cost by the quantity of goods produced.