Cliff’s basis in his Aero Partnership interest is $11,000. Cliff receives a distribution of $22,000 cash from Aero in complete liquidation of his interest. Aero is an equal partnership with the following Balance Sheet:
a. What is the amount and character of Cliff’s recognized gain or loss? What is the effect on the partnership assets? b. If Aero has a §754 election in place, what is the amount of the special basis adjustment?
Assets: Таx Basis FMV Cash $2,000 $ 22,000 Investment 8,800 8,800 Land 2,200 35,200 Totals $33,000 $ 6,000 Liabilities and capital: Capital - Chris 11,000 - Cliff 11,000 - Cooper 11,000 Totals $33,000