Randolph is a 30% 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?

Question

Quizplus · Accepted Answer

Randolph recognizes a capital loss on the distribution of $11,000 representing the difference between his basis in RD of $37,000 and the cash distribution of $26,000. He recognizes a loss because he receives only cash in the distribution and the amount is less than his basis in his partnership interest.

Randolph Is a 30% Partner in the RD Partnership