McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 42

Simon is a 30% partner in the SBD partnership, a calendar-year-end entity.As of the end of this year, Simon has an outside basis in his interest in SBD of $188,000, which includes his share of the $60,000 of partnership liabilities.On December 31, SBD makes a proportionate distribution of the following assets to Simon: a.What are the tax consequences (amount and character of recognized gain or loss, basis in distributed assets) of the distribution to Simon if the distribution is an operating distribution?
b.What are the tax consequences (amount and character of recognized gain or loss, basis in distributed assets) of the distribution to Simon if the distribution is a liquidating distribution?
c.Compare and contrast the results from parts a.and b.