Zelda Partnership holds cash of $30,000 and inventory worth $60,000 (basis equals $42,000). Zelda makes a $30,000 cash liquidating distribution to Link, a one-third partner with an outside basis of $24,000. How much gain or loss, if any, does Link recognize

6,000 ordinary gain

Explanation:

The computation of gain or loss is shown below:-

Given that

Worth of an inventory = $60,000

Basic inventory = $42,000

Now if we divide this two by each other so the percentage would be

= $60,000 ÷ $42,000 i.e to be greater than the 120% and it is said that the one third would be considered of $18,000

The $18,000 come from

= $42,000 - $24,000

= $18,000

Now its one third is $6,000 and the same is to be treated as ordinary gain