Heidi and Teresa Are Equal Partners in the HT Partnership

question 21

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 proportionate operating distribution to Teresa of $40,000 cash and stock with a fair value of $20,000 (inside basis of $7,000). What is the amount and character of Teresa's recognized gain or loss? What is Teresa's remaining basis in HT?

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Definitions:

Cerebral Palsy

A condition affecting body movement and muscle coordination, stemming from a stable brain injury or malformation that happens as the child's brain is being developed.

Hydrocephalus

Buildup of fluid pressure in the brain and, in infants, swelling of the head, if the flow of cerebrospinal fluid (CSF) is blocked; can result in intellectual impairment.

Prenatal Infections

Infections acquired by the fetus while in the womb, which can lead to various developmental issues or birth defects.

Laterally Located

Positioned on the side or sides of a body or structure.