Michelle Receives a Proportionate Liquidating Distribution When the Basis of Her

question 219

Multiple Choice

Michelle receives a proportionate liquidating distribution when the basis of her partnership interest is $50,000. The distribution consists of $58,000 cash and noninventory property (adjusted basis to the partnership of $10,000 and fair market value of $12,000) . The partnership has no hot assets. How much gain or loss does Michelle recognize, and what is her basis in the distributed property?

• A) $0 gain or loss? $0 basis in property.
• B) $0 gain or loss? $50,000 basis in property.
• C) $8,000 ordinary income? $0 basis in property.
• D) $8,000 capital gain? $10,000 basis in property.
• E) $8,000 capital gain? $0 basis in property.