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Simon is a 30 percent partner in the SBD Partnership, a calendar year-end entity. As of...

Simon is a 30 percent partner in the SBD Partnership, a calendar year-end entity. As of the end of this year, Simon has an outside basis in his interest in SBD of $188,000, which includes his share of the $60,000 of partnership liabilities. On December 31, SBD makes a proportionate distribution of the following assets to Simon:

Tax Basis FMV
Cash $ 40,000 $ 40,000
Inventory 55,000 65,000
Land 30,000 45,000
Totals $ 125,000 $ 150,000

  1. a1. What are the tax consequences (amount and character of recognized gain or loss) of the distribution to Simon if the distribution is an operating distribution?

  2. a2. What are the tax consequences (basis in distributed assets) of the distribution to Simon if the distribution is an operating distribution?

  3. b1. What are the tax consequences (amount and character of recognized gain or loss) of the distribution to Simon if the distribution is a liquidating distribution?

  4. b2. What are the tax consequences (basis in distributed assets after allocation) of the distribution to Simon if the distribution is a liquidating distribution?

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