The PW Partnership';s balance sheet includes the following assets immediately before it liquidates: In complete liquidation, PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Wade's recognized gain or loss?
A) $0.
B) $5,000 capital gain.
C) $5,000 ordinary income.
D) $2,500 capital gain and $2,500 ordinary income.

Question

The PW Partnership';s balance sheet includes the following assets immediately before it liquidates:  In complete liquidation, PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Wade's recognized gain or loss?
A) $0. 
B) $5,000 capital gain. 
C) $5,000 ordinary income. 
D) $2,500 capital gain and $2,500 ordinary income.

Quizplus · Accepted Answer

The Answer of The PW Partnership';s balance sheet includes the following assets immediately before it liquidates:  In complete liquidation, PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners). Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Wade's recognized gain or loss?
A) $0. 
B) $5,000 capital gain. 
C) $5,000 ordinary income. 
D) $2,500 capital gain and $2,500 ordinary income.

The PW Partnership';s Balance Sheet Includes the Following Assets Immediately