Francine receives a proportionate liquidating distribution when the basis of her partnership interest is $20,000.The distribution consists of $25,000 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 Francine 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;$12,000 basis in property.
C)$5,000 ordinary income;$0 basis in property.
D)$5,000 capital gain;$0 basis in property.
E)$5,000 capital gain;$10,000 basis in property.

Question

Quizplus · Accepted Answer

Francine recognizes a $5,000 capital gain because the cash received ($25,000) exceeds her partnership interest basis ($20,000) by $5,000. Her basis in the distributed property is $0 because the entire basis is used up by the cash distribution.

Francine Receives a Proportionate Liquidating Distribution When the Basis of Her