Carlos receives a proportionate liquidating distribution consisting of $8,000 cash and inventory with a basis to the partnership of $5,000 and a fair market value of $6,000.His basis in his partnership interest was $15,000 immediately before the distribution.Carlos assigns a basis of $5,000 to the inventory, and recognizes a $2,000 capital loss.

Question

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Carlos's basis in the inventory is $5,000, which is the same as the partnership's basis. He recognizes a capital loss of $2,000 because the fair market value of the inventory is $6,000, which is less than his basis.

Carlos Receives a Proportionate Liquidating Distribution Consisting of $8,000 Cash