Martha Receives a Proportionate Nonliquidating Distribution When the Basis of Her

question 97

Multiple Choice

Martha receives a proportionate nonliquidating distribution when the basis of her partnership interest is $50,000.The distribution consists of $60,000 cash and noninventory property (adjusted basis to the partnership of $20,000, fair market value of $23,000) .How much gain or loss does Martha recognize, and what is her basis in the distributed property and in her partnership interest following the distribution?

• A)$0 gain or loss; $20,000 basis in property; $0 basis in partnership interest.
• B)$0 gain or loss; $23,000 basis in property; $2,000 basis in partnership interest.
• C)$10,000 capital gain; $0 basis in property; $0 basis in partnership interest.
• D)$10,000 capital gain; $20,000 basis in property; $0 basis in partnership interest.
• E)$10,000 ordinary income; $0 basis in property; $10,000 basis in partnership interest.

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Definitions:

Decreases in Current Assets

The reduction in the value or amount of the assets that a company expects to convert into cash within one year.

Decreases in Current Assets

Reductions in the assets that a company expects to convert into cash, sell, or consume within one year or the operating cycle, whichever is longer.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for non-cash transactions and changes in working capital to find net cash provided by operating activities.

Net Cash Flows

The difference between a company's cash inflows and outflows within a specific period.