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Problem - Desi's adjusted basis of her partnership interest was $40,000 immediately before she received a distribution in full liquidation of her Makris partnership interest. (The partnership had no hot assets and also liquidated.) The distribution consisted of $25,000 in cash and land with a fair market value of $30,000. Makris's basis in the land was $10,000 immediately prior to the distribution. During the year, Desi sold the land for $50,000. How will Desi report the liquidating distribution and the sale on her income tax return?
Liquidating Distribution
Sale of the Land
a.
No gain or loss
$35,000 capital gain
b.
$40,000 capital gain
c.
$15,000 gain
$20,000 capital gain
d.
$5,000 loss
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