Anna has a $25,000 basis in her partnership interest when she receives liquidating distributions from the partnership. Anna receives cash of $18,000 and computer equipment with a basis to the partnership of $15,000. What are the tax consequences of the liquidating distributions to Anna?
What will be an ideal response?
Anna recognizes no gain or loss on the liquidation.
| Basis | $25,000 |
| Cash distribution | (18,000) |
| Basis before computer equipment | $ 7,000 |
Since computer equipment was distributed in liquidation, no loss can be recognized. The equipment then has a basis of $7,000 in the hands of Anna.
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What will be an ideal response?
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