Question 1. Anthony’s basis in the WAM Partnership interest was $200,000

1. Anthony’s basis in the WAM Partnership interest was $200,000 just before he received a proportionate liquidating

distribution consisting of investment land (basis of $90,000, fair market value of $100,000), and inventory (basis of

$30,000, fair market value of $70,000). After the distribution, Anthony’s recognized gain or loss and his basis in the land and inventory are:

a. $80,000 loss; $90,000 (land); $30,000 (inventory).

b. $70,000 loss; $100,000 (land); $30,000 (inventory).

c. $30,000 loss; $100,000 (land); $70,000 (inventory).

d. $0 gain or loss; $170,000 (land); $30,000 (inventory).

e. None of the above.

2. Beth has an outside basis of $100,000 in the BTDE Partnership as of December 31 of the current year. On that date the partnership liquidates and distributes to Beth a proportionate distribution of $50,000 cash and inventory with an inside basis to the partnership of $10,000 and a fair market value of $16,000. In addition, Beth receives an antique desk (not inventory) which has an inside basis and fair market value of $0 and $5,000, respectively. None of the distribution is for partnership goodwill. How much gain or loss will Beth recognize on the distribution, and what basis will she take in the desk?

a. $40,000 loss; $0 basis.

b. $35,000 loss; $5,000 basis.

c. $0 gain or loss; $5,000 basis.

d. $0 gain or loss; $40,000 basis.

e. None of the above.

3. Landis received $90,000 cash and a capital asset (basis of $50,000, fair market value of $60,000) in a proportionate liquidating distribution. His basis in his partnership interest was $120,000 prior to the distribution. How much gain or loss does Landis recognize and what is his basis in the asset received?

a. $0 gain or loss; $30,000 basis.

b. $0 gain or loss; $50,000 basis.

c. $0 gain or loss; $60,000 basis.

d. $20,000 gain; $50,000 basis.

e. $30,000 gain; $60,000 basis.

4. Jonathon owns a one­third interest in a liquidating partnership. Immediately before the liquidation, Jonathon’s basis in the partnership interest is $60,000. The partnership distributes cash of $32,000 and two parcels of land (each with a fair market value of $10,000). Parcel A has a basis of $2,000 to the partnership and Parcel B has a basis of $6,000. Jonathon’s basis in the two parcels of land is:

a. Parcel A, $2,000; Parcel B, $6,000.

b. Parcel A, $7,000; Parcel B, $21,000.

c. Parcel A, $10,000; Parcel B, $10,000.

d. Parcel A, $14,000; Parcel B, $14,000.

e. Parcel A, $15,000; Parcel B, $45,000.

5. Michelle receives a proportionate liquidating distribution when the basis of her partnership interest is $50,000. The distribution consists of $58,000 cash and noninventory property (adjusted basis to the partnership of $10,000 and fair market value of $12,000). The partnership has no hot assets. How much gain or loss does Michelle recognize, and what is her basis in the distributed property?

a. $0 gain or loss; $0 basis in property.

b. $0 gain or loss; $50,000 basis in property.

c. $8,000 ordinary income; $0 basis in property.

d. $8,000 capital gain; $10,000 basis in property.

e. $8,000 capital gain; $0 basis in property.

6. Suzy owns a 30% interest in the JSD LLC. In liquidation of the entity, Suzy receives a proportionate distribution of

$30,000 cash, inventory (basis of $16,000, fair market value of $18,000), and land (basis of $25,000, fair market value of $30,000). Suzy’s basis in the entity immediately before the distribution was $80,000. As a result of the distribution, what is Suzy’s basis in the inventory and land, and how much gain or loss does she recognize?

a. $0 basis in inventory; $25,000 basis in land; $0 gain or loss.

b. $16,000 basis in inventory; $34,000 basis in land; $0 gain or loss.

c. $16,000 basis in inventory; $25,000 basis in land; $9,000 loss.

d. $18,000 basis in inventory; $32,000 basis in land; $0 gain.

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