In a Proportionate Liquidating Distribution in Which the Partnership Is

Essay

In a proportionate liquidating distribution in which the partnership is liquidated, Bill received cash of $120,000, inventory (basis of $6,000, fair market value of $8,000), and a capital asset (basis and fair market value of $16,000). Immediately before the distribution, Bill's basis in the partnership interest was $90,000.

a. How much gain or loss will Bill recognize on the distribution?
b. What is Bill's basis in the inventory and the capital asset?