Sam Receives a Proportionate Nonliquidating Distribution When the Basis of His

question 96

Multiple Choice

Sam receives a proportionate nonliquidating distribution when the basis of his partnership interest is $40,000.He received a cash distribution of $25,000 and a property distribution (basis of $10,000 and fair market value of $12,000) .In addition,Sam's share of partnership liabilities was reduced by $20,000 during the year.How much gain or loss does Sam recognize;what is his basis in the property he received;and what is his remaining basis in the partnership interest?

• A)$0 gain or loss;$10,000 basis in property;$5,000 remaining basis.
• B)$0 gain or loss;$12,000 basis in property;$3,000 remaining basis.
• C)$5,000 gain;$0 basis in property;$0 remaining basis.
• D)$5,000 gain;$0 basis in property;$5,000 remaining basis.
• E)$17,000 gain;$12,000 basis in property;$0 remaining basis.

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Definitions:

Public Exchanges

Marketplaces for buying and selling securities, such as stocks and bonds, that are open to the public.

Money Orders

Financial instruments issued for a specific amount of money, acting as a safe alternative to cash or personal checks.

Cash

Money in the form of currency that can include coins, currency notes, and sight deposits at financial institutions.

Sarbanes-Oxley

A U.S. law passed in 2002 to protect investors from fraudulent financial reporting by corporations.