Sam Receives a Proportionate Nonliquidating Distribution When the Basis of His

Multiple Choice

Sam receives a proportionate nonliquidating distribution when the basis of his partnership interest is $40,000.He received a cash distribution of $25,000 and a property distribution (basis of $10,000 and fair market value of $12,000) .In addition,Sam's share of partnership liabilities was reduced by $20,000 during the year.How much gain or loss does Sam recognize;what is his basis in the property he received;and what is his remaining basis in the partnership interest?

A) $0 gain or loss;$10,000 basis in property;$5,000 remaining basis.
B) $0 gain or loss;$12,000 basis in property;$3,000 remaining basis.
C) $5,000 gain;$0 basis in property;$0 remaining basis.
D) $5,000 gain;$0 basis in property;$5,000 remaining basis.
E) $17,000 gain;$12,000 basis in property;$0 remaining basis.