The December 31,2008,balance Sheet of the DIP Partnership Reads as Follows

question 7

Multiple Choice

The December 31,2008,balance sheet of the DIP Partnership reads as follows.

Each partner shares in 1/3 of the partnership capital,income,gain,loss,deduction and credit.Capital is not a material income-producing factor to the partnership.On December 31,2008,general partner Dana receives a distribution of $120,000 cash in liquidation of her partnership interest under § 736.If Dana's outside basis for the partnership interest immediately before the distribution is $90,000,the recognized taxable gain and ordinary income from the distribution is:

• A)$30,000 ordinary income.
• B)$30,000 capital gain.
• C)$10,000 capital gain; $20,000 ordinary income.
• D)$20,000 capital gain; $10,000 ordinary income.
• E)None of the above.

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Definitions:

Contract

A legally enforceable agreement between two or more parties with mutual obligations.

Voidable

A legal term describing a contract or transaction that may be declared invalid by one of the parties to the contract.

Minor's Option

The legal ability of a minor to affirm or void contracts and agreements, based on their lack of legal capacity to enter into contracts.

Deposit

An upfront payment or security placed in trust or as a guarantee for the fulfillment of an obligation or purchase.