Question

the wxyz partnership has the following 2 assets

accounts receiable basic 0 value 20000

capital assets basic 12000 value 2000

if partner w with a 3000 basic in her 25% receives 10000 accounts receiveable  how much must  she recogize as a result of liquudation?

i am right in thning we just look at accounts receiveable and not capital assets right or wrong

Answer 1

Hi

Let me know in case any issue and query:

You are right with your thought. Because, W has been distributed AR in return on a complete liquidation. So whatever asset has been received gain or loss will be recognized only on the basis of that asset:

Solution: $0 Because, W's adjusted basis in asset is (12000*25%)- In case of complete liquidation, if only asset is received then no gain or loss is recognized. Answer: Explanation 3,000 Although, Accounts receivable is a hot assets, therefore, related gain is recognized as ordinary income. But in this case, no cash has been distributed, no ordinary income will be recogized on distribution of Accounts receivable. Ordinary Income $0 The basis in accounts receivable will be become 3,000