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

question 26

Multiple Choice

The PW partnership's balance sheet includes the following assets immediately before it liquidates: $\begin{array}{lrr}&\underline{Basis}&\underline{FMV}\\\text { Cash } & \$ \mathbf{\$ 1 0 , 0 0 0} & \$ \mathbf{\$ 1 0 , 0 0 0} \\\text { Unrealized receivables } & \underline{-0-} & \underline{\mathbf{\$ 2 0 , 0 0 0}} \\\text { Total } &\underline{\underline{{\mathbf{\$ 1 0 , 0 0 0}}}}& \underline{\underline{\$20,000}}\end{array}$ 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

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