Heidi and Teresa Are Equal Partners in the HT Partnership

question 92

Essay

Heidi and Teresa are equal partners in the HT Partnership. The partners formed the partnership seven years ago by contributing cash. Prior to any distributions, the partners each have a $50,000 basis in their partnership interests. On December 31, the partnership makes a pro rata operating distribution to Heidi of $60,000 cash. What is the amount and character of Heidi's recognized gain or loss? What is Heidi's remaining basis in HT?

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Definitions:

Actively Managed Mutual Funds

Investment funds where fund managers actively make decisions about buying and selling stocks or bonds to beat the market.

Passive Indexes

Investment funds designed to mimic the composition and performance of a designated market index, thereby minimizing management decisions and costs.

ETFs

Exchange-Traded Funds, investment funds that are traded on stock exchanges, much like stocks, but hold assets such as stocks, commodities, or bonds.

Front-end Load

A fee paid when purchasing shares of a mutual fund or other investment, typically used to cover commission expenses.