Randolph is a 30percent partner in the RD Partnership. On January 1, RD distributes $26,000 cash to Randolph in complete liquidation of his interest. RD has only capital assets and no liabilities at the date of the distribution. Randolph's basis in his RD Partnership interest is $37,000. What is the amount and character of Randolph's gain or loss on the distribution?
A)$0 gain or loss.
B)$11,000 capital gain.
C)$11,000 ordinary income.
D)$11,000 capital loss.

Question

Quizplus · Accepted Answer

Randolph recognizes a $11,000 capital loss on the liquidation of his partnership interest because the cash distribution ($26,000) is less than his basis in the partnership interest ($37,000), and the loss is capital in nature since the partnership's assets are capital assets.

Randolph Is a 30percent Partner in the RD Partnership