Nicole's basis in her partnership interest was $160,000, including her $50,000 share of partnership liabilities.The partnership decides to liquidate, and after repaying all liabilities, distributes all remaining assets proportionately to the partners.Nicole receives $30,000 cash and accounts receivable with a $50,000 basis and a $52,000 fair market value to the partnership.What gain or loss does Nicole recognize, and what is her basis in the accounts receivable?
A)$60,000 loss; $50,000 basis.
B)$30,000 loss; $50,000 basis.
C)$28,000 loss; $52,000 basis.
D)$78,000 loss; $52,000 basis.
E)$0 loss; $80,000 basis.

Question

Quizplus · Accepted Answer

To calculate the gain or loss recognized by Nicole, we need to compare the amount she received ($30,000 cash + $50,000 share of accounts receivable) to her basis ($160,000).

Nicole's share of remaining assets is ($52,000 x $50,000)/($50,000 + $52,000) = $25,490.

Thus, Nicole's total distribution is $30,000 + $25,490 = $55,490.

Her basis is $160,000, which is reduced by the distribution received of $55,490, resulting in a loss of $104,510.

Therefore, the answer is B.

To determine Nicole's basis in the accounts receivable, we need to subtract the loss recognized ($104,510) from her basis in the partnership interest ($160,000) and then add the fair market value of the accounts receivable ($52,000).

Thus, Nicole's basis in the accounts receivable is $107,490 - $104,510 + $52,000 = $54,980.

Nicole's Basis in Her Partnership Interest Was $160,000, Including Her