In a Proportionate Liquidating Distribution, Sara Receives a Distribution of $40,000

question 27

Multiple Choice

In a proportionate liquidating distribution, Sara receives a distribution of $40,000 cash, accounts receivable (basis of $0, fair market value of $30,000) , and inventory (basis of $50,000, fair market value of $60,000) . Sara's basis in the entity immediately before the distribution was $120,000. As a result of the distribution, what is Sara's basis in the accounts receivable and inventory, and how much gain or loss does she recognize?

• A) $0 basis in accounts receivable? $50,000 basis in inventory? $30,000 loss.
• B) $0 basis in accounts receivable? $80,000 basis in inventory? $0 gain or loss.
• C) $40,000 basis in accounts receivable? $40,000 basis in inventory? $0 gain or loss.
• D) $30,000 basis in accounts receivable? $50,000 basis in inventory? $30,000 loss.
• E) $30,000 basis in accounts receivable? $60,000 basis in inventory? $10,000 gain.

Realize the necessity for continuous learning and skill enhancement in organizational settings.

Grasp the concept of organizational culture and its impact on organizational performance.

Understand the balance required in managing multiple performance determinants simultaneously.

Appreciate the time frame and challenges involved in implementing and verifying the success of major changes.

---

Definitions:

Reward Power

The ability to influence others by offering them something desirable in return for their compliance or performance.

Zero-Sum Quantity

A situation in which one party's gain is exactly balanced by another party's loss, typically in a competitive scenario.

Sources Of Power

The origins or bases from which an individual, group, or organization derives the ability to influence others.