Reference no: EM132779426

Sylvie received the following assets in complete liquidation of her partnership interest during the current year:

Cash $10,000

Inventory- with basis to the partnership of $12,000 & a FMV of $15,000

Land Parcel A- with basis to the partnership of $12,000 & a FMV of $20,000

Land Parcel B- with a basis to the partnership of $4,000 & a FMV of $5,000

Sylvie's outside basis in her partnership interest was $30,000 immediately prior to the liquidating distribution.

Problem 1: IF SYLVIE SELLS THE INVENTORY THE TAX YEAR FOLLOWING THE YEAR OF THE DISTRIBUTION WHAT AMOUNT & TYPE OF GAIN OR LOSS SHOULD BE REPORTED?

A. $3,000 long-term capital gain

B. $3,000 ordinary income

C. $0

D. Losses cannot be deducted on liquidating distributions.

E. $3,000 short-term capital gain

F. one of the above