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5.10 Aidy, Bo and Cody are the members of Lightstock LLC, a limited...

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Accounting

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5.10 Aidy, Bo and Cody are the members of Lightstock LLC, a limited liability company taxed as a partnership that is a retailer of incandescent light bulbs. Its balance sheet (with values added) is as follows: Lightstock's business prospects have dimmed in recent years, and Cody wants out. The partnership is short on cash, but it strikes a deal to liquidate Cody's interest with a distribution of some of its inventory of bulbs. The partnership distributes $25,000 worth of inventory to Cody and makes a section 754 election. What gain or loss does Cody recognize on this distribution and what is the amount of the partnership's section 734(b) adjustment? a) No gain or loss; negative adjustment of $14,000 b) Capital loss of $14,000; negative adjustment of $14,000 c) Capital loss of $14,000; positive adjustment of $14,000 d) Capital loss of $39,000; positive adjustment of $39,000

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