George received $40,000 cash and a capital asset with a basis and fair market value of $15,000 in a proportionate liquidating distribution.His basis in his partnership interest was $70,000 prior to the distribution.How much gain or loss does George recognize, and what is his basis in the capital asset received in the distribution?

Question

Quizplus · Accepted Answer

George's total basis in the partnership interest is $70,000. He receives $40,000 in cash and a capital asset worth $15,000, totaling $55,000. Since the total distribution ($55,000) is less than his basis ($70,000), he recognizes no gain or loss. His remaining basis of $15,000 is allocated to the capital asset, making its basis $30,000.

George Received $40,000 Cash and a Capital Asset with a Basis