Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $15,000 cash and inventory with a fair value of $20,000 (inside basis of $10,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in RD is $27,000. What is the amount and character of Randolph's gain or loss on the distribution?

Question

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Randolph's basis in RD is $27,000. He receives $15,000 cash and inventory with a basis of $10,000, totaling $25,000. The difference between his basis and the distribution is $2,000, resulting in a capital loss.

Randolph Is a 30% Partner in the RD Partnership