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

question 87

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 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

---

Definitions:

International Commerce

Refers to the exchange of goods, services, and capital across international borders or territories.

Certificate of Limited Partnership

A legal document filed with a state governmental body that officially recognizes a limited partnership's existence.

Capital Contributions

Monetary or non-monetary assets provided by partners or shareholders to increase the capital of a partnership or corporation.

LLC

A limited liability company, which is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.