Question

At the end of last year, Cynthia, a 20% partner in the five-person CYG partnership, has an outside basis of $30,000 including her $15,000 share of CYG debt. On January 1 of the current year, Cynthia sells her partnership interest to Roger for a cash payment of $22,500 and the assumption of her share of CYG's debt. CYG has no hot assets. What is the amount and character of Cynthia's recognized gain or loss on the sale?

Answer 1

Cynthia recognized a gain of $7,500

Step-by-step explanation:

Outside basis=market fare value of Cynthia's share

Outside basis= $30,000

Debt=$15,000,debt is a liability

Net value of Cynthia's share=Value of share-Liabilities

Replacing;

Net value of Cynthia's share=(30,000-15,000)=$15,000

She sells the value of Cynthia's share together with her debt;

She sells Net value of her share=$15,000 to Roger for $22,500

Cynthia's gain=Selling value-Net value of share

where;

Selling value=$22,500

Net value of share=$15,000

replacing;

Cynthia's gain=(22,500-15,000)=$7,500

Cynthia recognized a gain of $7,500