The PW Partnership's Balance Sheet Includes the Following Assets Immediately

question 14

Multiple Choice

The PW partnership's balance sheet includes the following assets immediately before it liquidates: $$\begin{array} { | l | l | r | } \hline \text { Liabilities and Capital: } & & \\\hline \text { Capital } & \text { Paul } & 48,000 \\\hline & \text { Kristi } & 48,000 \\\hline & \text { David } & 48,000 \\\hline\end{array}$$ In complete liquidation PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners) . Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Wade's recognized gain or loss?

• A) $0
• B) $5,000 capital gain
• C) $5,000 ordinary income
• D) $2,500 capital gain and $2,500 ordinary income

---

Definitions:

Price Level

An index that measures the average of current prices across the entire spectrum of goods and services produced in the economy, reflecting the cost of living and inflation.

Average Price Level

The average price level is a measure of the overall level of prices in an economy over a period of time, often used to gauge inflation.

Exports

Goods or services that are produced in one country and sold to buyers in another, contributing to a country's foreign trade.

Real Balances

The purchasing power of an individual's or firm's cash in hand, considering inflation or deflation effects.