In a proportionate liquidating distribution, Sam receives a distribution of $30,000 cash, accounts receivable (basis of $0, fair market value of $50,000), and land (basis of $20,000, fair market value of $50,000). In addition, the partnership repays all liabilities of which Sam’s share was $40,000. Sam’s basis in the entity immediately before the distribution was $120,000. As a result of the distribution, what is Sam’s basis in the accounts receivable and land, and how much gain or loss does he recognize?
A. $0 basis in accounts receivable; $50,000 basis in land; $0 gain or loss.
B. $0 basis in accounts receivable; $90,000 basis in land; $0 gain or loss.
C. $50,000 basis in accounts receivable; $40,000 basis in land; $0 gain or loss.
D. $50,000 basis in accounts receivable; $50,000 basis in land; $50,000 gain.
E. $0 basis in accounts receivable; $70,000 basis in land; $30,000 loss.
Answer: A
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