In a Proportionate Liquidating Distribution, Lina Receives a Distribution of $10,000

Multiple Choice

In a proportionate liquidating distribution, Lina receives a distribution of $10,000 cash, accounts receivable (basis of $0 and fair market value of $12,000) , and inventory (basis of $30,000 and fair market value of $40,000) . Lina's basis in the entity immediately before the distribution was $80,000. As a result of the distribution, what is Lina's basis in the accounts receivable and inventory, and how much gain or loss does she recognize?

A) $0 basis in accounts receivable; $30,000 basis in inventory; $40,000 loss.
B) $0 basis in accounts receivable; $70,000 basis in inventory; $0 gain or loss.
C) $0 basis in accounts receivable; $40,000 basis in inventory; $50,000 loss.
D) $12,000 basis in accounts receivable; $30,000 basis in inventory; $28,000 gain.
E) $12,000 basis in accounts receivable; $40,000 basis in inventory; $18,000 gain.