Suzy Owns a 30% Interest in the JSD LLC

question 159

Multiple Choice

Suzy owns a 30% interest in the JSD LLC.In liquidation of the entity, Suzy receives a proportionate distribution of $30,000 cash, inventory (basis of $16,000, fair market value of $18,000) , and land (basis of $25,000, fair market value of $30,000) .Suzy's basis in the entity immediately before the distribution was $80,000.As a result of the distribution, what is Suzy's basis in the inventory and land, and how much gain or loss does she recognize?

• A)$0 basis in inventory; $25,000 basis in land; $0 gain or loss.
• B)$16,000 basis in inventory; $34,000 basis in land; $0 gain or loss.
• C)$16,000 basis in inventory; $25,000 basis in land; $9,000 loss.
• D)$18,000 basis in inventory; $32,000 basis in land; $0 gain.
• E)$25,000 basis in inventory; $25,000 basis in land; $0 gain or loss.

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Definitions:

Type I Error

A Type I Error occurs when a true null hypothesis is incorrectly rejected, also known as a "false positive".

Binomial Population

A population in which each member of the population has only two possible outcomes or states, often conceptualized as success or failure.

Population Proportion

The fraction or percentage of individuals in a population who possess a particular attribute or characteristic.

Critical Value

A point on the scale of the test statistic beyond which we reject the null hypothesis; it marks the boundary for deciding whether a statistic is significant.