Michelle receives a proportionate liquidating distribution when the basis of her partnership interest is $50,000. The distribution consists of $58,000 cash and noninventory property (adjusted basis to the partnership of $10,000 and fair market value of $12,000). The partnership has no hot assets. How much gain or loss does Michelle recognize, and what is her basis in the distributed property?
A) $0 gain or loss; $10,000 basis in property.
B) $0 gain or loss; $50,000 basis in property.
C) $8,000 ordinary income; $0 basis in property.
D) $8,000 capital gain; $10,000 basis in property.
E) $8,000 capital gain; $0 basis in property.

Question

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The Answer of Michelle receives a proportionate liquidating distribution when the basis of her partnership interest is $50,000. The distribution consists of $58,000 cash and noninventory property (adjusted basis to the partnership of $10,000 and fair market value of $12,000). The partnership has no hot assets. How much gain or loss does Michelle recognize, and what is her basis in the distributed property?
A) $0 gain or loss; $10,000 basis in property.
B) $0 gain or loss; $50,000 basis in property.
C) $8,000 ordinary income; $0 basis in property.
D) $8,000 capital gain; $10,000 basis in property.
E) $8,000 capital gain; $0 basis in property.

Michelle Receives a Proportionate Liquidating Distribution When the Basis of Her