Matt Receives a Proportionate Nonliquidating Distribution

question 10

Multiple Choice

Matt receives a proportionate nonliquidating distribution.At the beginning of the partnership year, the basis of his partnership interest is $60,000.During the year, he received a cash distribution of $25,000 and a property distribution (basis of $20,000, fair market value of $12,000) .In addition, Matt's share of partnership liabilities was reduced by $20,000 during the year.How much gain or loss does Matt recognize; what is his basis in the property he received; and what is his remaining basis in the partnership interest?

• A)$3,000 loss; $12,000 basis in property; $0 remaining basis.
• B)$0 gain or loss; $15,000 basis in property; $0 remaining basis.
• C)$0 gain or loss; $20,000 basis in property; $15,000 remaining basis.
• D)$0 gain or loss; $12,000 basis in property; $23,000 remaining basis.
• E)$5,000 gain; $20,000 basis in property; $0 remaining basis.

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Definitions:

EAR

Effective Annual Rate, the actual return on an investment or the actual interest rate on a loan over one year, including compounding.

APR

Annual Percentage Rate, a comprehensive measure of the cost of borrowing on an annual basis, including interest and fees.

Effective Annual Rate

The real interest rate on an investment or loan, considering the effects of compounding over a one-year period.