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

question 42

Multiple Choice

The PW partnership's balance sheet includes the following assets immediately before it liquidates: $\begin{array}{c}\begin{array}{lll}\\Cash\\\text{Unrealized receivables}\\Totals\\\end{array}\begin{array}{lll}\underline{\text { Basis }} \\\mathbf{1 0 , 0 0 0} \\\underline{\mathbf{-0-}} \\\$ \mathbf{10 , 0 0 0}\\\end{array}\begin{array}{lll}\underline{FMV}\\\mathbf{\$ 1 0 , 0 0 0} \\\underline{\mathbf{1 0 , 0 0 0}} \\\mathbf{\$ 2 0 , 0 0 0}\\\end{array}\end{array}$ 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 Pamela'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

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Definitions:

Annual Requirements

The total quantity or volume of resources, goods, or services needed by an organization or project over the course of a year.

Pull System

A method of production control where downstream activities signal their needs to upstream activities, promoting just-in-time production and minimizing inventories.

Production Management

The process of planning, organizing, leading, and controlling the production of goods and services, focusing on efficient and effective production methods.

Final Customer

The end-user or consumer who purchases a product or service for their own use, as opposed to purchasing for resale or manufacturing purposes.