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How much loss may Michelle recognize

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Problem - Michelle has a basis in her partnership interest of $85,000. In a proportionate liquidating distribution of the partnership, Michelle receives $5,000 cash and a car (a § 1231 asset to the partnership) having a basis of $20,000 to the partnership and a fair market value of $30,000. For our purposes, disregard any potential depreciation recapture on the car.

Required -

a. How much loss, if any, may Michelle recognize on the distribution?

b. What basis will Michelle take in the car?

c. Suppose Michelle's 18-year-old son uses the car for his personal use for one year before Michelle sells it for $28,000. How much loss may Michelle recognize on the sale of the car? What tax planning procedures should be considered?

Reference no: EM132648483

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