Aaron Owns a 30% Interest in a Continuing Partnership

question 30

Multiple Choice

Aaron owns a 30% interest in a continuing partnership. The partnership distributes a $35,000 year-end cash bonus to all the partners. In a proportionate nonliquidating distribution, the partnership also distributed property (basis of $15,000; fair market value of $20,000) to Aaron. Immediately before the distribution, Aaron's basis in the partnership interest was $50,000. As a result of the distribution, Aaron recognizes:

• A) No gain or loss.
• B) Ordinary loss of $5,000.
• C) Capital loss of $5,000.
• D) Ordinary gain of $5,000.
• E) Capital gain of $5,000.

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Definitions:

PR Column

Likely refers to a reference or designation in accounting or bookkeeping but insufficient context for a precise definition. Could potentially mean "Posting Reference" column used to track entries in ledgers.

Sales Tax

A tax levied by a government on the sale of goods and services, collected by the retailer at the point of sale and passed on to the government.

Merchandise

Goods that are purchased for resale at a profit.

Asset Account

An account that records all financial transactions related to a company's assets, including current and fixed assets.