2. Nadine Fimple is a one-third partner in the NWL Partnership with equal inside

Question

2. Nadine Fimple is a one-third partner in the NWL Partnership with equal inside and outside bases. On January 1, NWL distributes $100,000 to Nadine in complete liquidation of her FPL interest. NWL's balance sheet as of January 1 is as follows: Basis FMV Cash $120,000 $120,000 Inventory 60,000 180,000 Total $180,000 $300,000 Nadine, capital $60,000 Wendell, capital 60,000 Louis, capital 60,000 Total $180,000 What is the amount and character of Nadine's recognized gain or loss on the distribution?

Explanation / Answer

      schedule of cash payment of partners($)

Items cash + non cash assets = liability + N + W + C

before liquidation 120000 60000 = 0 60000 60000 60000

sale of inventory 180000 (60000) = 0 0 0 0

New balance 300000 0 = 0 100000 100000 100000

cash distribution (300000) 0 = 0 (100000)   (100000)   (100000)

Final balance 0 0 = 0 0    0 0

  No Profit and Loss for Nadine

Note:-   N = nadine , W = wendell , L = Louis

   profit on sale of inventory of $ 120000 (180000- 60000) will be distributed to NWC in 1:1:1

So, New balance

N= 60000+40000

W= 60000 +40000

C=60000+40000

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