The PW Partnership's Balance Sheet Includes the Following Assets Immediately

question 88

Multiple Choice

The PW partnership's balance sheet includes the following assets immediately before it liquidates: $\begin{array}{lrr}\text { Basis } & \text { FMV } \\\text {Cash}&\$ 10,000 & \$ 10,000 \\\text {Unrealized receivables}&\underline { -0- }& \underline { 10,000 }\\\text {Total}&\underline { \$ 10,000}&\underline { \$ 20,000}\end{array}$ In complete liquidation,PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners) .Pamela and Wade each have an outside basis in PW equal to $5,000.PW has no liabilities at the time of the liquidation.What is the amount and character of Wade's recognized gain or loss?

• A)$0.
• B)$5,000 capital gain.
• C)$5,000 ordinary income.
• D)$2,500 capital gain and $2,500 ordinary income.