Items 1 and 2 are based on the following data:
Mike Reed, a partner in Post Co., received the following distribution from Post:
|
Post’s basis |
Fair market value |
|
|
Cash |
$11,000 |
$11,000 |
|
Inventory |
5,000 |
12,500 |
Before this distribution, Reed’s basis in Post was $25,000.
If this distribution were nonliquidating, Reed’s basis for the inventory would be
- $14,000
- $12,500
- $ 5,000
- $ 1,500
If this distribution were in complete liquidation of Reed’s interest in Post, Reed’s recognized gain or loss resulting from the distribution would be
- $7,500 gain.
- $9,000 loss
- $1,500 loss.
- $0