Question

a. On December 31, Gina receives a distribution of $140,000 cash in liquidation of her partnership interest. Nothing is stated in the partnership agreement about goodwill. Gina's outside basis for the partnership interest immediately before the distribution is $90,000. (1) How much is Gina's recognized gain from the distribution

Answer 1

Gina's recognized gain from the liquidation distribution of her partnership interest is calculated by subtracting her outside basis from the cash received. The recognized gain would be $50,000.

Step-by-step explanation:

When Gina receives a cash distribution of $140,000 in liquidation of her partnership interest, and her outside basis is $90,000, she realizes a gain. To calculate the recognized gain, you subtract the outside basis from the cash distribution. Since nothing is stated about goodwill in the partnership agreement, the entire distribution is considered in this calculation.

The calculation would be as follows:

1. Determine the cash received: $140,000.
2. Subtract the outside basis in the partnership interest immediately before the distribution: $90,000.
3. The result is Gina's recognized gain: $140,000 - $90,000 = $50,000.

Therefore, Gina's recognized gain from the distribution is $50,000.