Slate Quarry, a general partnership, had the following balance sheets at Decembe
ID: 2577636 • Letter: S
Question
Slate Quarry, a general partnership, had the following balance sheets at December 31:
Basis FMV
Cash $30,000 $30,000
Inventory 20,000 30,000
Land 50,000 90,000
$100,000 $150,000
Capital, Fred $60,000 $90,000
Capital, Wilma $20,000 $30,000
Capital, Barney $20,000 $30,000
$100,000 $150,000
On January 1, the partnership distributed the inventory to Barney in complete liquidation of his twenty percent interest in the partnership. How much ordinary income will the partnership recognize on receipt of the distribution under Code Sec. 751(b)?
a. zero
b. $10,000
c. $2,000
d. $8,000
e. None of the above
Explanation / Answer
Ordinary income to be recognized on receipt of the distribution =(30000-20000)*20% = $2000 Option C is correct
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