Nicky's basis in her partnership interest was $150,000, including her $40,000 share of partnership liabilities. The partnership decides to liquidate, and after repaying all liabilities, distributes all remaining assets proportionately to the partners. Nicky receives $30,000 cash and inventory with a $50,000 basis and a $58,000 fair market value to the partnership. What loss does Nicky recognize, and what is her basis in the inventory?
A) $70,000 loss; $50,000 basis.
B) $30,000 loss; $50,000 basis.
C) $22,000 loss; $58,000 basis.
D) $62,000 loss; $58,000 basis.
E) $0 loss; $80,000 basis.

Question

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Nicky's basis in the partnership interest is $150,000. She receives $30,000 cash and inventory with a $50,000 basis. Her total received is $80,000 ($30,000 cash + $50,000 inventory basis). The loss recognized is $70,000 ($150,000 basis - $80,000 received), but since the inventory basis is $50,000, the loss is $30,000.

Nicky's Basis in Her Partnership Interest Was $150,000, Including Her