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:

Cerebellum

A major structure of the hindbrain that is involved in motor control, coordination, precision, and timing of movements.

Sleep

A naturally recurring state of mind and body characterized by altered consciousness, relatively inhibited sensory activity, inhibition of nearly all voluntary muscles, and reduced interactions with surroundings.

Pons

A part of the brain located in the brainstem that is involved in the regulation of vital functions, such as sleeping, breathing, and coordination of movement.

Dreaming

The experience of envisioned images, sounds, or other sensations during sleep, particularly during REM sleep phases.