Pettifog Partnership distributes cash of $20,000, hot assets worth $5,000, and a

Question

Pettifog Partnership distributes cash of $20,000, hot assets worth $5,000, and a parcel of land in a liquidating distribution to Gupta, a partner. The hot assets have a basis of $0 to the partnership. The land has a fair market value of $80,000 and an inside basis of $55,000. Gupta's outside basis in Pettifog just prior to the distribution is $85,000. Identify the amount of gain or loss Gupta must recognize and Gupta's resulting basis in the land.

Gain or Loss

Basis in Land

a.

$0

$60,000

b.

$10,000 loss

          $0

c.

$0

$65,000

d.

$5,000 loss

          $0

Gain or Loss

Basis in Land

a.

$0

$60,000

b.

$10,000 loss

          $0

c.

$0

$65,000

d.

$5,000 loss

          $0

Explanation / Answer

Since amount cash paid 20000 is less then Gupta's outside basis of 85000

he will not recognise any gain or loss.

Further Out of 85000

20000 is attributable to Cash received i.e only 65000 is left as attributable to other assets distributed

First 5000 will be applicable to Hot assets and remianing 60000 will be aplicable to Land

so anwer is option 1

Gain or loss = NIl

Basis in Land = 60000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.