In a Proportionate Liquidating Distribution, Ashleigh Receives a Distribution of $30,000

question 83

Multiple Choice

In a proportionate liquidating distribution, Ashleigh receives a distribution of $30,000 cash, accounts receivable (basis of $0, fair market value of $40,000) , and land (basis of $40,000, fair market value of $50,000) . In addition, the partnership repays all liabilities, of which Ashleigh's share was $70,000. Ashleigh's basis in the entity immediately before the distribution was $60,000. As a result of the distribution, what is Ashleigh's basis in the accounts receivable and land, and how much gain or loss does she recognize?

• A)$0 basis in accounts receivable; $0 basis in land; $40,000 gain.
• B)$0 basis in accounts receivable; $30,000 basis in land; $0 gain or loss.
• C)$0 basis in accounts receivable; $40,000 basis in land; $0 gain or loss.
• D)$40,000 basis in accounts receivable; $20,000 basis in land; $0 gain.
• E)$40,000 basis in accounts receivable; $20,000 basis in land; $100,000 gain.

---

Definitions:

Excess Social Security Tax

The amount by which Social Security taxes withheld exceed the maximum limit set for the year.

Lookback Period

The lookback period is a specified duration during which past financial activities are reviewed for legal, tax, or regulatory purposes.

Withholding Allowance

An exemption that reduces how much income tax an employer deducts from an employee's paycheck.

Federal Withholding Tax

Taxes automatically deducted from an employee's paycheck by the employer and paid to the federal government.