Mack Has a Basis in a Partnership Interest of $200,000

question 157

Multiple Choice

Mack has a basis in a partnership interest of $200,000, including his share of partnership debt. At the end of the current year, the partnership distributed to Mack, in a proportionate current (nonliquidating) distribution, cash of $20,000, inventory (basis to the partnership of $30,000 and fair market value of $40,000) , and land (basis to the partnership of $40,000 and fair market value of $42,000) . In addition, Mack's share of partnership debt decreased by
$12,000 during the year. What basis does Mack take in the inventory and land and in the partnership interest
(including debt share) following the distribution?

• A) $30,000 basis in inventory; $40,000 basis in land, $98,000 basis in partnership.
• B) $30,000 basis in inventory; $42,000 basis in land, $110,000 basis in partnership.
• C) $40,000 basis in inventory; $40,000 basis in land, $86,000 basis in partnership.
• D) $40,000 basis in inventory; $42,000 basis in land, $98,000 basis in partnership.
• E) $40,000 basis in inventory; $42,000 basis in land, $110,000 basis in partnership.

---

Definitions:

Complete Information

A condition in decision-making where all relevant data and potential outcomes are known and accessible.

Probabilities

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1, where 1 indicates certainty.

Escalation of Commitment

Escalation of commitment refers to the phenomenon where individuals or groups continue to invest in a decision or project despite evidence of its ineffectiveness or failure, often due to cognitive biases.

Avoiding Trap

A decision-making error where individuals choose to evade or postpone decisions to avoid conflict or mistakes.