Nadine Fimple Is a One-Third Partner in the NWL Partnership

question 84

Short Answer

Nadine Fimple is a one-third partner in the NWL Partnership with equal inside and outside bases. On January 1, NWL distributes $100,000 to Nadine in complete liquidation of her FPL interest. NWL's balance sheet as of January 1 is as follows: $\begin{array}{l}\begin{array}{c}\\Cash\\Inventory\\Total\\\end{array}\begin{array}{c}\text { Basis } \\\$ \mathbf{12 0 , 0 0 0} \\\underline{\mathbf{6 0 , 0 0 0}} \\\$ \mathbf{18 0 , 0 0 0} \\\hline\end{array}\begin{array}{c}{\text { FMV }}\\{\$ 120,000} \\\underline{\mathbf{180, 0 0 0}} \\\hline \mathbf{\$300 , 0 0 0} \\\end{array}\end{array}$

Brooke, capital $\quad\quad\$60,000$
Penelope, capital $\quad\quad60,000$
Amanda, capital $\quad\quad\underline{60,000}$
Total $\quad\quad\quad\quad\quad\quad\$180,000$ What is the amount and character of Nadine's recognized gain or loss on the distribution?

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Definitions:

Coupon

The interest rate paid by a bond, typically expressed as an annual percentage of the bond's face value.

Income Bond

A type of debt security that only pays interest if the issuer has sufficient earnings.

Semi-annual

Occurring two times a year, generally spaced six months apart.

Buying Power

The amount of goods or services that one's money can purchase, often influenced by inflation.