Suzy owns a 30% interest in the JSD LLC. In liquidation of the entity, Suzy receives a proportionate distribution of $30,000 cash, inventory (basis of $16,000, fair market value of $18,000), and land (basis of $25,000, fair market value of $30,000). Suzy's basis in the entity immediately before the distribution was $80,000. As a result of the distribution, what is Suzy's basis in the inventory and land, and how much gain or loss does she recognize?
A) $0 basis in inventory; $25,000 basis in land; $0 gain or loss.
B) $16,000 basis in inventory; $34,000 basis in land; $0 gain or loss.
C) $16,000 basis in inventory; $25,000 basis in land; $9,000 loss.
D) $18,000 basis in inventory; $32,000 basis in land; $0 gain or loss.
E) $16,000 basis in inventory; $25,000 basis in land; $39,000 loss..

Question

Quizplus · Accepted Answer

Suzy's total basis in the distribution is $80,000. After receiving $30,000 cash, $50,000 basis remains to be allocated to the inventory and land. The inventory takes its basis of $16,000, and the remaining $34,000 is allocated to the land. No gain or loss is recognized in a proportionate distribution.

Suzy Owns a 30% Interest in the JSD LLC