Becker CPA Review 21-10

Desi's adjusted basis of her partnership interest was $40,000 immediately before she received a distribution in full liquidation of her Makris partnership interest. (The partnership had no hot assets and also liquidated.) The distribution consisted of $25,000 in cash and land with a fair market value of $30,000. Makris's basis in the land was $10,000 immediately prior to the distribution. During the year, Desi sold the land for $50,000. How will Desi report the liquidating distribution and the sale on her income tax return?

Liquidating Distribution

Sale of the Land

a.

No gain or loss $35,000 capital gain

b.

No gain or loss $40,000 capital gain

c.

$15,000 gain $20,000 capital gain

d.

$5,000 loss $40,000 capital gain