Beth has an outside basis of $100,000 in the BTDE Partnership as of December 31 of the current year. On that date the partnership liquidates and distributes to Beth a proportionate distribution of $50,000 cash and inventory with an inside basis to the partnership of $10,000 and a fair market value of $16,000. In addition, Beth receives an antique desk (not inventory) which has an inside basis and fair market value of $0 and $5,000, respectively. None of the distribution is for partnership goodwill. How much gain or loss will Beth recognize on the distribution, and what basis will she take in the desk?
A) $0 gain or loss; $5,000 basis.
B) $40,000 loss; $0 basis.
C) $0 gain or loss; $40,000 basis.
D) $35,000 loss; $5,000 basis.
E) None of the above.

Question

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The Answer of Beth has an outside basis of $100,000 in the BTDE Partnership as of December 31 of the current year. On that date the partnership liquidates and distributes to Beth a proportionate distribution of $50,000 cash and inventory with an inside basis to the partnership of $10,000 and a fair market value of $16,000. In addition, Beth receives an antique desk (not inventory) which has an inside basis and fair market value of $0 and $5,000, respectively. None of the distribution is for partnership goodwill. How much gain or loss will Beth recognize on the distribution, and what basis will she take in the desk?
A) $0 gain or loss; $5,000 basis.
B) $40,000 loss; $0 basis.
C) $0 gain or loss; $40,000 basis.
D) $35,000 loss; $5,000 basis.
E) None of the above.

Beth Has an Outside Basis of $100,000 in the BTDE