Daniela Is a 25% Partner in the JRD Partnership

question 96

Multiple Choice

Daniela is a 25% partner in the JRD Partnership. On January 1, JRD makes a liquidating distribution of $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000) , and accounts receivable with a fair value of $8,000 (inside basis of $12,000) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in JRD is $20,000. What is the amount and character of Daniela's gain or loss from the distribution?

• A) $0
• B) $16,000 ordinary income
• C) $16,000 capital gain
• D)$20,000 capital gain

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Definitions:

Substantive Unconscionability

A legal principle that allows courts to refuse to enforce contracts or clauses that are excessively unfair or one-sided.

Bargaining Power

Refers to the ability of one party in a negotiation to influence the terms and conditions in their favor.

Harsh Terms

Unfavorably stringent conditions or stipulations in a contract or agreement that may seem unfair to one party.

Implied-in-Fact Contract

An agreement created by the actions or circumstances of the parties involved rather than by written or spoken words.