Last Year,Oscar Contributed Nondepreciable Property with a Basis of $40,000

question 55

Multiple Choice

Last year,Oscar contributed nondepreciable property with a basis of $40,000 and a fair market value of $50,000 to the Starling Partnership in exchange for a 25% interest in the partnership.In the current year,he receives a nonliquidating distribution from the partnership of other property with a basis to the partnership of $26,000 and a fair market value of $32,000.The basis in his partnership interest at the time of the distribution was $30,000.How much gain or loss does Oscar recognize on the distribution? (Assume no other distributions have been made to Oscar,the property he originally contributed is still owned by the partnership,and this is not a disguised sale transaction.)

• A)$0 gain or loss.
• B)$2,000 gain.
• C)$10,000 gain.
• D)$18,000 gain.
• E)$4,000 loss.

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Definitions:

No-par Shares

Stocks issued without a specified face value, where the value is determined by the price investors are willing to pay for them.

Stock Subscription

An agreement to purchase a specified number of shares in a company, often before they are available to the general public.

Board Of Directors

A group of individuals elected to represent shareholders and oversee the management and major decisions of a corporation.

Stock Warrants

Financial instruments that give the holder the right, but not the obligation, to buy shares of a company at a specified price before the warrant expires.