In a proportionate liquidating distribution, Alexandria receives a distribution of $70,000 cash, accounts receivable (basis of $0, fair market value of $20,000), and land (basis of $30,000, fair market value of $60,000).In addition, the partnership repays all liabilities, of which Alexandria's share was $40,000.Alexandria's basis in the entity immediately before the distribution was $90,000.As a result of the distribution, what is Alexandria's basis in the accounts receivable and land, and how much gain or loss does she recognize?
A)$0 basis in accounts receivable; $0 basis in land; $20,000 gain.
B)$0 basis in accounts receivable; $30,000 basis in land; $0 gain or loss.
C)$0 basis in accounts receivable; $0 basis in land; $0 gain or loss.
D)$0 basis in accounts receivable; $30,000 basis in land; $0 gain.
E)$20,000 basis in accounts receivable; $0 basis in land; $20,000 gain.

Question

Quizplus · Accepted Answer

Alexandria's basis in the accounts receivable is $0 because the basis of the accounts receivable was $0. Alexandria's basis in the land is $30,000 because the basis of the land was $30,000. Alexandria's gain is $20,000 because the fair market value of the accounts receivable is $20,000 and her basis in the accounts receivable is $0.

In a Proportionate Liquidating Distribution, Alexandria Receives a Distribution of $70,000