Beth Has an Outside Basis of $100,000 in the BTDE

question 174

Multiple Choice

Beth has an outside basis of $100,000 in the BTDE Partnership as of December 31 of the current year.On that date the partnership liquidates and distributes to Beth a proportionate distribution of $50,000 cash and inventory with an inside basis to the partnership of $10,000 and a fair market value of $16,000.In addition,Beth receives an antique desk (not inventory) which has an inside basis and fair market value of $0 and $5,000,respectively.None of the distribution is for partnership goodwill.How much gain or loss will Beth recognize on the distribution,and what basis will she take in the desk?

• A)$40,000 loss;$0 basis.
• B)$35,000 loss;$5,000 basis.
• C)$0 gain or loss;$5,000 basis.
• D)$0 gain or loss;$40,000 basis.
• E)None of the above.

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Definitions:

Welded

The process by which materials are joined together through melting and cooling, often referring to the solidification of pyroclastic material in volcanic environments.

Accretion

The addition of tectonic terranes and other material to an existing landmass, usually along a convergent or transform plate boundary.

Rifting

The process of the Earth's crust being pulled apart, leading to the formation of rift valleys and potentially new ocean basins.

Subsidence

The gradual sinking or settling of an area of land, which can be caused by natural processes or human activities.