Daniela is a 25% partner in the JRD Partnership. On January 1, JRD makes a proportionate liquidating distribution of $20,000 cash and inventory with a $15,000 fair value (inside basis $5,000) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in her JRD partnership interest is $21,000. What is the amount and character of Daniela's gain or loss from the distribution?

Question

Quizplus · Accepted Answer

Daniela will not recognize any gain or loss on the distribution. She will instead reduce the basis of the inventory she receives in complete liquidation of her interest.

Daniela Is a 25% Partner in the JRD Partnership