Beth Has an Outside Basis of $100,000 in the BTDE

question 123

Multiple Choice

Beth has an outside basis of $100,000 in the BTDE Partnership as of December 31 of the current year. On that date the partnership liquidates and distributes to Beth a proportionate distribution of $50,000 cash and inventory with an inside basis to the partnership of $10,000 and a fair market value of $16,000. In addition, Beth receives an antique desk (not inventory) which has an inside basis and fair market value of $0 and $5,000, respectively. None of the distribution is for partnership goodwill. How much gain or loss will Beth recognize on the distribution, and what basis will she take in the desk?

• A) $0 gain or loss; $5,000 basis.
• B) $40,000 loss; $0 basis.
• C) $0 gain or loss; $40,000 basis.
• D) $35,000 loss; $5,000 basis.
• E) None of the above.

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Definitions:

Concurrent Validity

The extent to which test scores correlate with scores on an established test of the same skill or knowledge area, taken at the same time.

Discriminant Validity

A measure of the degree to which a test or tool is capable of distinguishing between different constructs or phenomena.

Construct Validity

The extent to which a test accurately measures the theoretical, non-observable construct or trait it is intended to assess.

Correlation

A statistical measure that describes the extent to which two variables change together.