Question

Partner Z of the XYZ partnership receives a liquidating distribution of the following: Basis

Partner Z of the XYZ partnership receives a liquidating distribution of the following:

Basis                                  FMV

Cash \$40,000                       \$40,000

Inventory \$30,000                       \$45,000

Unrealized receiv. \$50,000                       \$45,000

1. Z’s basis in her partnership interest was \$95,000. What is her gain or loss and the bases of the assets distributed to her?

2. Assume Z’s basis in her partnership interest was \$130,000. What is her gain or loss and the bases of the assets distributed to her?

The capital percentages are already factored in because this is the liquidating distribution that Partner Z is receiving (so the amount allocated has factored this in). The question is what is her gain or loss where a partner receives solely cash, unrealized receivables and inventory items (all ordinary income items) in a liquidating distribution.

1. There is no gain or loss. The deficit between inside an outside basis is \$25,000(\$120,000-\$95,000) . The base of assets distributed to her as follows:

Beginning basis

 Cash \$40,000 Inventory (\$30,000- \$20,000(\$30,000/(\$30,000+\$45,000)) \$22,000 Unrealized receivables (\$50,000-\$5,000- \$20,000(\$45,000/(\$30,000+\$45,000)) \$33,000

2. Her loss will ne equals to \$10,000. Her outside basis of \$130,000 minus the total of cash and basis of the assets distributed, \$120,000. Her bases in assets distributed will be the same as I'm the hands of the partnership.

_____×_____

All the best

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