Question

Randolph is a 30 percent partner in the RD Partnership. On January 1, RD distributes $15,000 cash and inventory with a fair value of $20,000 (inside basis of $10,000) to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in his RD Partnership interest is $27,000. What is the amount and character of Randolph's gain or loss on the distribution?

Answer 1

$2,000 capital loss

Step-by-step explanation:

Randolph recognizes a $2,000 capital loss because RD distributes only cash and inventory and the adjusted bases of the property distributed is less than his basis in RD.