Paula’s basis in her partnership interest is $60,000. In liquidation of her interest, the partnership makes a proportionate distribution to Paula of $20,000 of cash and inventory (basis of $5,000 and value of $7,000). (Assume the partnership also liquidates.)
a. How much gain or loss, if any, will Paula recognize on the distribution?
b. What basis will Paula take in the inventory?
c. What are the tax consequences to the partnership?
d. Can you recommend an alternative distribution? Explain.
e. Would your answer to (a) or (b) change if this had been a nonliquidating distribution? Explain.

  • CreatedSeptember 09, 2015
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