James received $42,000 cash and a capital asset (basis of $45,000 and fair market value of $54,000)in a proportionate liquidating distribution.His basis in his partnership interest was $90,000 prior to the distribution.How much gain or loss does James recognize and what is his basis in the asset received?
A)$0 gain or loss; $45,000 basis.
B)$0 gain or loss; $48,000 basis.
C)$6,000 gain; $54,000 basis.
D)$3,000 loss; $45,000 basis.
E)$3,000 gain; $45,000 basis.

Question

Quizplus · Accepted Answer

Because James has received property other than cash and unrealized receivables or inventory,no loss may be recognized on the liquidating distribution.The capital asset will take a substituted basis of $48,000,which was James's remaining basis in his partnership interest after the cash distribution is considered.

James Received $42,000 Cash and a Capital Asset (Basis of $45,000