Question

Cadwallader has had a 30% interest in C&C Associates, a partnership, since 20X9. In 20X14, the partnership is liquidated. The partnership's only assets at the time of liquidation are $50,000 in cash and land with a fair market value of $60,000 and a basis of $65,000. C&C Associates has no liabilities. Cadwallader's adjusted basis for her partnership interest is $34,500 and she receives $30,000 cash in liquidation of her entire interest. What amount and type of loss should Cadwallader recognize on her 20X14 tax return?
a. $4,500 ordinary loss
b. $4,500 long-term capital loss
c. $4,500 short-term capital loss
d. $0

Answer 1

Answer:

correct option is b. $4,500 long-term capital loss

Explanation:

given data

assets = $50,000

fair market value = $60,000

basis = $65,000

adjusted basis before distribution = $34,500

liquidation in cash = $30,000

to find out

amount and type of loss should Cadwallader recognize on tax return

solution

we know here adjusted basis before distribution and liquidation in cash so we will get here amount and type of loss that is

amount and type of loss = adjusted basis before distribution - liquidation in cash  

amount and type of loss = $34,500 - $30,000

amount and type of loss = $4500  long term loss

so correct option is b. $4,500 long-term capital loss