Aaron Owns a 30% Interest in a Continuing Partnership

question 37

Multiple Choice

Aaron owns a 30% interest in a continuing partnership.The partnership distributes a $35,000 year-end cash payment to all the partners.In a proportionate nonliquidating distribution, the partnership also distributed property (basis of $15,000, fair market value of $20,000) to Aaron.Immediately before the distribution, Aaron's basis in the partnership interest was $50,000.As a result of the distribution, Aaron recognizes:

• A)No gain or loss.
• B)Ordinary loss of $5,000.
• C)Capital loss of $5,000.
• D)Ordinary gain of $5,000.
• E)Capital gain of $5,000.

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