Questions -

Q1. The ABC Partnership makes a proportionate non liquidating distribution to one of its partners of two Section 1231 assets. Asset A has a basis of $40,000 and a fair market value of $15,000; Asset B has a basis of $30,000 and a fair market value of $20,000. If the partner's outside basis in his partnership interest is only $35,000, what basis does he have in the assets that are distributed to him?

Q2. Charles owns a 25 percent interest in Cal Corporation, an S corporation. The corporation has run into some difficulties recently and Charles loaned it $10,000. At the beginning of the year, Charles's basis in his stock was $16,000.

a. What is Charles's basis in his stock and debt at the end of the year if the corporation reports losses of $60,000?

b. What is Charles's basis in his stock and debt at the end of the year if the corporation reports losses of $90,000?

c. What is Charles's basis in his stock and debt at the end of the year if the corporation reports losses of $120,000?