Misha Receives a Proportionate Nonliquidating Distribution When the Basis of Her

question 29

Multiple Choice

Misha receives a proportionate nonliquidating distribution when the basis of her partnership interest is $60,000.The distribution consists of $80,000 cash and inventory (adjusted basis to the partnership of $10,000,fair market value of $20,000) .How much gain or loss does Misha recognize,and what is her basis in the distributed inventory and in her partnership interest following the distribution?

• A)$0 gain or loss;$10,000 basis in inventory;$0 basis in partnership interest.
• B)$0 gain or loss;$20,000 basis in inventory;$50,000 basis in partnership interest.
• C)$20,000 capital gain;$0 basis in inventory;$0 basis in partnership interest.
• D)$20,000 capital gain;$10,000 basis in inventory;$0 basis in partnership interest.
• E)$20,000 ordinary income;$0 basis in inventory;$20,000 basis in partnership interest.

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Definitions:

Factory Overhead

All manufacturing costs that are not directly related to the production of goods, including costs associated with operating the factory.

Overhead Costs

Fixed and variable costs incurred in the operation of a business that do not directly contribute to the production of goods or services.

Individual Processes

Refers to the distinct and separate steps or stages involved in the production or execution of a service or product.

Physical Products

Tangible items that can be bought, sold, or traded, often contrasted with digital goods or services.