Adnan Had an Adjusted Basis of $11,000 for His Interest

question 95

Essay

Adnan had an adjusted basis of $11,000 for his interest in the Adnan and Donnell Partnership on December 31. On this date, Adnan received from the partnership, in complete liquidation of his interest, $10,000 cash and land with a $2,000 basis to the partnership and a $3,000 FMV. What is Adnan's basis for the land distributed to him?

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Definitions:

Inventory

The raw materials, work-in-process products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

LIFO Method

A method of inventory valuation where the last items added to inventory are the first ones to be used or sold.

FIFO Method

An inventory valuation method that assumes the first items purchased are the first ones sold, standing for "First-In, First-Out."

Inventory Valuation

The method of calculating the cost associated with the inventory held by a business, influencing financial statements and taxation.