Amanda is a 30% partner in the ACW Partnership with an outside basis of $22,000. ACW distributes land with a basis of $12,000 and fair value of $18,000 to Amanda in complete liquidation of her interest. Amanda recognizes a capital loss of $4,000 on the distribution.

a. True

b. False

True

Explanation:

ACW distributed land worth $12,000.00 and paid a fair value of $18,000.00 to Amand as cost of capital liquidation.

Since Amanda has received the cumulative sum of $30,000 from the partnership deal and accepted a $4,000.00 capital loss on distribution. Amanda still has $26,000.00 remaining which is still a huge gain so far and a huge profit.

The correct answer is option (b) False

Explanation:

In complete liquidation of a partner's interest, a partner can only recognize a capital loss only if his or her outside basis is more than the value of money or assets.

From the question given, Amanda did not receive any distribution in form of cash and assets. Therefore, no capital loss can be recognized by Amanda.