Doris Owns a 1/3 Capital and Profits Interest in the Calendar-Year

question 66

Essay

Doris owns a 1/3 capital and profits interest in the calendar-year DB Partnership. Her adjusted basis for her partnership interest on July 1 of the current year is $20,000. On that date, she receives an operating distribution of her share of partnership assets shown below: $$\begin{array} { | l | c | c | } \hline & \text { Partnership's Basis in Asset } & \text { Asset's Fair Market Value } \\\hline \text { Cash } & \$ 81,000 & \$ 81,000 \\\hline \text { Inventory } & 36,000 & 24,000 \\\hline \text { Land } & 120,000 & 135,000 \\\hline\end{array}$$ What is the amount and character of Doris' gain or loss on the distribution? What is her basis in the distributed assets?

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Definitions:

Self-Serving Bias

The common tendency to attribute successes to personal characteristics and failures to external factors, often to maintain self-esteem.

Actor-Observer Effect

The tendency to make internal attributions for the behavior of others and external attributions for our own behavior.

External Attributions

The process of attributing the cause of one's own or others' behavior to external factors, such as the situation or other people, rather than to internal characteristics.

Self-Affirmation Theory

The idea that people respond less defensively to threats to one aspect of themselves if they think about another valued aspect of themselves.