In a Proportionate Liquidating Distribution, Lina Receives a Distribution of $10,000

question 46

Multiple Choice

In a proportionate liquidating distribution, Lina receives a distribution of $10,000 cash, accounts receivable (basis of $0 and fair market value of $12,000) , and inventory (basis of $30,000 and fair market value of $40,000) . Lina's basis in the entity immediately before the distribution was $80,000. As a result of the distribution, what is Lina's basis in the accounts receivable and inventory, and how much gain or loss does she recognize?

• A) $0 basis in accounts receivable; $30,000 basis in inventory; $40,000 loss.
• B) $0 basis in accounts receivable; $70,000 basis in inventory; $0 gain or loss.
• C) $0 basis in accounts receivable; $40,000 basis in inventory; $50,000 loss.
• D) $12,000 basis in accounts receivable; $30,000 basis in inventory; $28,000 gain.
• E) $12,000 basis in accounts receivable; $40,000 basis in inventory; $18,000 gain.

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Definitions:

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A vaccination that provides protection against the influenza virus, recommended annually to prevent flu-related illnesses.

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Inactivated Vaccine

A type of vaccine made from virus particles, bacteria, or other pathogens that have been killed or altered so they cannot cause disease.