Question

Isabella is a 30% partner in the ITV Partnership. On January 1, ITV distributes $32,000 cash, inventory with a $32,000 fair value (inside basis $16,000), and accounts receivable with a fair value of $16,000 (inside basis of $24,000). ITV has no liabilities at the date of the distribution. Isabella's basis in ITV is $40,000. What is the amount and character of Isabella's gain or loss from the liquidating distribution?

Answer 1

Answer:

$0

Explanation:

We know that:

• Isabella is 30% Partner In ITV
• with basis of $40000

ITV Distribute s:

• $32,000 cash
• $32,000 inventory (Inside Basis $16,000)
• $16,000 receivable (Inside Basis $24,000)

Therefore, we calculate Isabella's net gain or loss

$32000 × 30% = $9,600 Cash

$32000 × 30% = $9,600 Inventory

$24000 × 30% = $7,200 Receivable

The total amount is

$9600 + $4800 + $7200 =$21,600

Therefore Isabella's net gain or loss will be  $40,000 - $21,600 = $18,400.

From the calculations, Isabella will have $0 gain or loss from the liquidating distribution