Question

Angie sold her interest in a partnership for $40,000 cash when her outside basis was $20,000. She was also relieved of her $30,000 share of partnership liabilities. What is Angie's gain from the sale of the partnership interest?

a. $20,000
b. $40,000
c. $50,000
d. $70,000

Answer 1

Angie's total amount realized from the sale of her partnership interest is $70,000. After subtracting her original outside basis of $20,000, her gain comes out to $50,000. Thus, the correct answer to the question is c. $50,000.

Step-by-step explanation:

The question involves calculating the gain from the sale of Angie's partnership interest. Angie sold her interest for $40,000 cash and was relieved of her $30,000 share of partnership liabilities, making the total amount realized from the sale $70,000 ($40,000 cash + $30,000 debt relief).

Her original outside basis in the partnership was $20,000. The gain is calculated by subtracting the outside basis from the amount realized, which gives us a gain of $50,000 ($70,000 - $20,000).

Correct Answer

The correct answer to the question is c. $50,000.