The PW Partnership's balance sheet includes the following assets immediately before it liquidates: In complete liquidation, PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Pamela's recognized gain or loss?
A)$0.
B)$5,000 capital gain.
C)$5,000 ordinary income.
D)$2,500 capital gain and $2,500 ordinary income.

Question

The PW Partnership's balance sheet includes the following assets immediately before it liquidates:  In complete liquidation, PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Pamela's recognized gain or loss?
A)$0. 
B)$5,000 capital gain. 
C)$5,000 ordinary income. 
D)$2,500 capital gain and $2,500 ordinary income.

Quizplus · Accepted Answer

The Answer of The PW Partnership's balance sheet includes the following assets immediately before it liquidates:  In complete liquidation, PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Pamela's recognized gain or loss?
A)$0. 
B)$5,000 capital gain. 
C)$5,000 ordinary income. 
D)$2,500 capital gain and $2,500 ordinary income.

The PW Partnership's Balance Sheet Includes the Following Assets Immediately