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a.How much gain or loss does Stuart recognize on this distribution?b.What is Stuart’s basis in the receivables and land he receives in the distribution?a.Stuart recognizes no gain or loss. He received a cash distribution of $180,000 (including his relief of liabilities), which did not exceed his basis of $200,000. Even though this is a liquidating distribution, Stuart received property other than cash, unrealized receivables and inventory so he may not claim a loss.b.Stuart’s basis is reduced to $20,000 by the cash distribution. He has a carryover/substituted basis in the unrealized receivables of $0. The land absorbs the remaining $20,000 basis.92. In a proportionate liquidating distribution in which the partnership is liquidated, Marcus received cash of $60,000, inventory (basis of $10,000, fair market value of $12,000), and a capital asset (basis and fair market value of $22,000). Immediately before the distribution, Marcus’s basis in the partnership interest was $100,000.a.How much gain or loss will Marcus recognize on the distribution?b.What is Marcus’s basis in the inventory and the capital asset?a.Marcus does not recognize a capital gain or loss on the liquidation of his partnership interest. He did not receive cash in excess of his basis in the partnership interest, so he does not recognize a gain. Also, because Marcus received assets other than cash and “hot assets,” he may not recognize a loss.b.Marcus’s bases in the inventory and capital asset are $10,000 and $30,000, respectively. His basis is reduced to $40,000 by the cash distribution. The inventory is distributed next and takes a $10,000 carryover basis. The remaining $30,000 basis is allocated to the capital asset.
93. In a proportionate liquidating distribution in which the partnership is liquidated, Bill received cash of $120,000, inventory (basis of $6,000, fair market value of $8,000), and a capital asset (basis and fair market value of $16,000). Immediately before the distribution, Bill’s basis in the partnership interest was $90,000.a.How much gain or loss will Bill recognize on the distribution?b.What is Bill’s basis in the inventory and the capital asset?a.Bill recognizes a capital gain of $30,000 on the liquidation of his partnership interest. This equals the excess of the cash distribution over Bill’s basis in his partnership interest before the distribution ($120,000 cash – $90,000 basis).b.Bill’s bases in the inventory and capital asset are both $0. His basis is reduced to $0 by the cash distribution, so he has no remaining basis to allocate to the other properties.94. Josh has a 25% capital and profits interest in the calendar-year GDJ Partnership. His adjusted basis for his partnership interest on October 15 of the current year is $300,000. On that date, the partnership liquidates and makes a proportionate distribution of the following assets to Josh.Partnership’s Basis in AssetAsset’s Fair Market ValueCashInventory$ 70,000120,000 $ 70,000 150,000a.Calculate Josh’s recognized gain or loss on the liquidating distribution, if any.b.How would your answer to a. change if the partnership also distributed a small parcel of land it had held for investment to Josh? Assume the land has a $5,000 adjusted basis (FMV is $8,000) to the partnership.