Misha Receives a Proportionate Current (Nonliquidating) Distribution When the Basis

question 113

Multiple Choice

Misha receives a proportionate current (nonliquidating) distribution when the basis of his partnership interest is $60,000. The distribution consists of $80,000 cash and inventory (adjusted basis to the partnership of $10,000, fair market value of $20,000) . How much gain or loss does Misha recognize, and what is his basis in the distributed inventory and in the partnership interest following the distribution?

• A) $0 gain or loss; $10,000 basis in inventory; $0 basis in partnership interest.
• B) $0 gain or loss; $20,000 basis in inventory; $50,000 basis in partnership interest.
• C) $20,000 capital gain; $0 basis in inventory; $0 basis in partnership interest.
• D) $20,000 capital gain; $10,000 basis in inventory; $0 basis in partnership interest.
• E) $20,000 ordinary income; $0 basis in inventory; $20,000 basis in partnership interest.

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