Brittany receives a nonliquidating distribution of $48,000 cash from her partnership.Brittany's basis in her partnership interest prior to the distribution is $25,000.What are the tax consequences of the distribution?
A)$48,000 ordinary income; $25,000 partnership basis
B)$48,000 nontaxable return of capital,($23,000)partnership basis
C)$25,000 nontaxable return of capital,capital gain of $23,000,$0 partnership basis
D)$25,000 nontaxable return of capital,ordinary income of $23,000,$0 partnership basis

Question

Quizplus · Accepted Answer

The distribution is a return of capital up to Brittany's basis of $25,000, reducing her basis to $0. The excess $23,000 is a capital gain.

Brittany Receives a Nonliquidating Distribution of $48,000 Cash from Her