Marty Receives a Proportionate Nonliquidating Distribution When the Basis of Her

question 103

Multiple Choice

Marty receives a proportionate nonliquidating distribution when the basis of her partnership interest is $50,000.The distribution consists of $60,000 cash and noninventory property (adjusted basis to the partnership of $20,000;fair market value of $23,000) .How much gain or loss does Marty recognize,and what is her basis in the distributed property and in her partnership interest following the distribution?

• A)$0 gain or loss;$20,000 basis in property;$0 basis in partnership interest.
• B)$0 gain or loss;$23,000 basis in property;$2,000 basis in partnership interest.
• C)$10,000 capital gain;$0 basis in property;$0 basis in partnership interest.
• D)$10,000 capital gain;$20,000 basis in property;$0 basis in partnership interest.
• E)$10,000 ordinary income;$0 basis in property;$10,000 basis in partnership interest.

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Definitions:

Activity-Based Costing

A costing methodology that assigns overhead and indirect costs to specific activities, providing more accurate product costing.

Estimated Overhead Cost

The projected costs of indirect materials, labor, and other expenses that are necessary for production but cannot be directly associated with specific product units.

Direct Labour-Hours

A measure of the amount of time workers spend directly manufacturing a product or providing a service.

Traditional Costing System

A traditional costing system allocates factory overhead to products based on volume-related measures such as direct labor hours or machine hours.