Nicky's basis in her partnership interest was $150,000, including her $40,000 share of partnership liabilities. The partnership decides to liquidate, and after repaying all liabilities, distributes all remaining assets proportionately to the partners. Nicky receives $30,000 cash and accounts receivable with a $50,000 basis and a $48,000 fair market value to the partnership. What gain or loss does Nicky recognize, and what is her basis in the accounts receivable?
A)$70,000 loss; $50,000 basis.
B)$30,000 loss; $50,000 basis.
C)$32,000 loss; $48,000 basis.
D)$72,000 loss; $48,000 basis.
E)$0 loss; $80,000 basis.

Question

Quizplus · Accepted Answer

Nicky's basis in the partnership interest is $150,000. She receives $30,000 cash and accounts receivable with a $50,000 basis. The total basis of the assets received is $80,000 ($30,000 cash + $50,000 accounts receivable). The loss recognized is $150,000 - $80,000 = $70,000. However, the correct choice reflects a $30,000 loss, which is the difference between her basis in the partnership and the fair market value of the assets received. Her basis in the accounts receivable remains $50,000.

Nicky's Basis in Her Partnership Interest Was $150,000, Including Her