Greg, Yenny, Rachel, and Harry form an equal partnership betweenpartners. It has the following...

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Accounting

Greg, Yenny, Rachel, and Harry form an equal partnership betweenpartners. It has the following assets: $30,000 in cash, inventoryworth $40,000 in which the partnership has a basis of $20,000, anda capital asset worth $20,000 in which the partnership has a basisof $12,000. The partnership distributes $22,500 in cash to Greg inliquidation of Greg's interest in the partnership when Greg has abasis of $15,500. What are the tax consequences? Explain theanswer
A. Greg recognizes a capital gain of $7,000. The partnershipdoes not adjust the basis of any of its assets.
B. Greg recognizes an ordinary gain of $5,000 and a capital gainof $2,000. The partnership does not adjust the basis of any of itsassets unless an election under Section 754 is in effect.
C.Greg recognizes an ordinary gain of $5,000 and a capital gainof $2,000. The partnership’s overall basis in inventory isincreased by $5,000.
D.Greg recognizes a capital gain of $7,000. The partnershipincreases its basis in property by $7,000 due Greg's recognition ofgain.

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Part A Since the partnership has not adjusted the basis of any of its assets thus the capital gain recognized by Greg ie 7000 will be taxed in the hands of Greg The capital gain of 7000 will See Answer

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In: AccountingGreg, Yenny, Rachel, and Harry form an equal partnership betweenpartners. It has the following assets:...Greg, Yenny, Rachel, and Harry form an equal partnership betweenpartners. It has the following assets: $30,000 in cash, inventoryworth $40,000 in which the partnership has a basis of $20,000, anda capital asset worth $20,000 in which the partnership has a basisof $12,000. The partnership distributes $22,500 in cash to Greg inliquidation of Greg's interest in the partnership when Greg has abasis of $15,500. What are the tax consequences? Explain theanswerA. Greg recognizes a capital gain of $7,000. The partnershipdoes not adjust the basis of any of its assets.B. Greg recognizes an ordinary gain of $5,000 and a capital gainof $2,000. The partnership does not adjust the basis of any of itsassets unless an election under Section 754 is in effect.C.Greg recognizes an ordinary gain of $5,000 and a capital gainof $2,000. The partnership’s overall basis in inventory isincreased by $5,000.D.Greg recognizes a capital gain of $7,000. The partnershipincreases its basis in property by $7,000 due Greg's recognition ofgain.