Answer:
No gain or loss, Cash basis $10,000, Inventory $15,000
Explanation:
Calculation for Mia’s recognized gain or loss
First step is to calculate for Mia outside adjusted basis
Using this formula
Outside adjusted basis=Outside basis - Liabilities
Let plug in the formula
Outside adjusted basis=$50,000 - $25,000
Outside adjusted basis= $25,000
Second step is to calculate for Mia Gain or loss
Using this formula
Gain/Loss=Outside adjusted basis- Cash received - Inside basis
Let plug in the formula
Gain/Loss =$25,000 -$10,000 -$20,000
Gain/Loss = ($5,000)
Since Mia had ($5,000) this means Mia has no gain or loss
Last step is to calculate for Mia Inventory
Using this formula
Inventory = Cash + Gain/Loss
Let plug in the formula
Inventory =$10,000 + $5,000
Inventory = $15,000
Therefore Mai has NO gain or loss, Cash basis amount of $10,000 and Inventory amount of $15,000
