The XYZ Partnership owns the following assets on December 31:
Cash Basic 10000 FMV 10000 Unrealized receivable Basic 0 FmV10000 Inventory Basic 25000 FMV 30000 A partner has a 20% interest with a basis of $6,000 in XYZ before receiving a liquidating distribution of $10,000 cash. XYZ Partnership has no liabilities. His recognized gain is (hint: Section 751 plays a role in answering this)
$4,000 capital gain.
$3,000 capital gain and $1,000 ordinary income
$3,000 ordinary income.
$3,000 ordinary income and $1,000 capital gain.